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These Three Spanish Banks Will Be Downgraded Tomorrow

Tyler Durden's picture


As is well-known in the ratings world, sovereign downgrades never come alone: first the sovereign is cut, then sovereign-supported domestic banks (the sovereign is the threshold rating), then general financial companies like insurance firms and specialty fins. Such downgrades are particularly painful when they go through a major threshold such from A to B as they spring various collateral and margin calls into action. One thing we do know is that the last thing undercapitalized Spanish banks can afford now is even more margin calls, and even greater collateral haircuts. However, this is precisely what will happen for the following 3 banks tomorrow: Banco Popular Espanol, Banco Santander and BBVA, all of which are currently at the old sovereign rating of A3 and tomorrow will see their rating cut to Baa3, and we fully expect the other three Moody's rated banks: Caixa, Banco Financiero y de Ahorros and Sabadell to be cut anywhere between 1 and 3 more notches, sending them into junk territory. We can only hope that the ESM or whatever Spanish bank bailout scheme is operational tomorrow as suddenly all of the banks below will find themselves without any willing counterparties around the world.

And for those who want a great interactive rating infographic of all European banks, one can be found at the WSJ after the jump below.


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Wed, 06/13/2012 - 19:01 | Link to Comment Alpacanio
Alpacanio's picture

Junk bitchez!

Wed, 06/13/2012 - 19:05 | Link to Comment NotApplicable
NotApplicable's picture

"Suddenly all of the banks below will find themselves without any willing counterparties around the world."

If only it could happen to all of them.

Wed, 06/13/2012 - 19:09 | Link to Comment veyron
veyron's picture

Then the banks would trade internally, effectively transferring shareholder wealth to their pockets ...

Wed, 06/13/2012 - 19:38 | Link to Comment Excursionist
Excursionist's picture

The ECB will continue to be a willing counterparty.

Wed, 06/13/2012 - 19:49 | Link to Comment trebuchet
trebuchet's picture

Not this time.

They have to keep their poweer dry to help the survivors pick themselves up, knowing full well their own "arsenal" is full of impaired toilet paper.

Along with ALL CBs. 

Hence the gold buying, and no action so far. 

They are keeping whatever is left for the Lehman moment which could be any day now. 




Wed, 06/13/2012 - 20:14 | Link to Comment Excursionist
Excursionist's picture

What dry powder?  When the ECB is leveraged something like 45:1 (haven't checked in a while), does it really matter if the ratio is amp'ed up to, say, 47:1 ?

The arsenal is impaired only when marks are taken, and I would convulse from shock if that were allowed to happen.

Wed, 06/13/2012 - 20:36 | Link to Comment q99x2
q99x2's picture

They can always pay in cash.

Wed, 06/13/2012 - 20:55 | Link to Comment stocktivity
stocktivity's picture

Thumbs Up for the chuckle

Wed, 06/13/2012 - 20:05 | Link to Comment ZeroChance
ZeroChance's picture

Good business to be in right now?  Spiderman towel mill !  As Banco Santander is going to be dialing up an order in 3 - 2 - ...

Wed, 06/13/2012 - 19:03 | Link to Comment bnbdnb
bnbdnb's picture

Sweet, more money in the stock pot.

Wed, 06/13/2012 - 19:05 | Link to Comment GubbermintWorker
GubbermintWorker's picture

Wow, what a surprise!! /sarc


The more the peel is taken off, the more "oh fucks" come forward. Rotten to the core.

Wed, 06/13/2012 - 19:06 | Link to Comment JackT
JackT's picture


Wed, 06/13/2012 - 19:07 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

This banking stuff resembles this:


Wed, 06/13/2012 - 19:09 | Link to Comment Alpacanio
Alpacanio's picture

Have you hugged your banker today???

Wed, 06/13/2012 - 19:14 | Link to Comment GubbermintWorker
GubbermintWorker's picture

I'm sorry, but I have to correct your typo:


"Have you hunged your banker today?",  Should have been "Have you hung your banker today?"

Wed, 06/13/2012 - 19:32 | Link to Comment jamezelle
jamezelle's picture


Wed, 06/13/2012 - 21:51 | Link to Comment Heavy
Heavy's picture

I like "hunged", sounds scarier Deliverance.  Get more deterrent effect for your energy.

Wed, 06/13/2012 - 19:12 | Link to Comment Paul Atreides
Paul Atreides's picture

IT humour: change the reffering query string at the end of the WSJ article URL from:





Wed, 06/13/2012 - 19:13 | Link to Comment SIOP
SIOP's picture

As of today, the dominos seem to be falling faster, and those dominos do cross the atlantic.  Scary times indeed.

Wed, 06/13/2012 - 19:24 | Link to Comment GubbermintWorker
GubbermintWorker's picture

Yeah, wait til the masses find out that the light at the end of the tunnel was a frieght train.

Wed, 06/13/2012 - 19:29 | Link to Comment Paul Atreides
Paul Atreides's picture

Anyone who hasn't pulled out of the paper markets and banks is sitting in this caboose.

Wed, 06/13/2012 - 20:22 | Link to Comment GubbermintWorker
GubbermintWorker's picture

Awww, man, I'm still exposed there but have taken such a hit on early IRA withdrawals. Gold and Silver miners, SLV etf, and TIP's bonds. Good to go on physical gold, silver, and .....lead.

Wed, 06/13/2012 - 19:14 | Link to Comment ronaldawg
ronaldawg's picture

Is there some Intratrade or other facility that we can bet against these banks (yeah more derivatives and CDS!) - I can't wait for this whole house of cards to come crumbling down.

Wed, 06/13/2012 - 19:19 | Link to Comment Piranhanoia
Piranhanoia's picture

They won't pay you if you win.  Why play at all?

Wed, 06/13/2012 - 19:25 | Link to Comment Papasmurf
Papasmurf's picture

Usually, betting against the house doesn't work out well.

Wed, 06/13/2012 - 19:16 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

Commence Cannibalism!

Wed, 06/13/2012 - 19:24 | Link to Comment world_debt_slave
world_debt_slave's picture

three little piggies went to market

Wed, 06/13/2012 - 19:33 | Link to Comment GubbermintWorker
GubbermintWorker's picture

THIS is what is all about....

Wed, 06/13/2012 - 19:40 | Link to Comment vincent
vincent's picture

Charlie Rose just finished segment regarding European crisis. Gillian Tett one guest. Worth watching, as it deals with various facets of the reality in an informative, contemplative and adult manner.

Complete opposite of the clownshow which is world politics and rampant criminality.

My kid is a teenager. Her generation will need to grow up in a hurry.  She'll be prepared.

Wed, 06/13/2012 - 19:48 | Link to Comment azzhatter
azzhatter's picture

Santander- couldn't happen to a better douchebag bank. Close the pig down

Wed, 06/13/2012 - 19:48 | Link to Comment Al Huxley
Al Huxley's picture

Not a problem, the Italians can just spot them a few Euros until the Spanish real estate market bounce back.

Wed, 06/13/2012 - 20:03 | Link to Comment jmc8888
jmc8888's picture

Santander has the potential to be the next lehman, whether it IS, or not, remains to be seen.  It is an Inter-Alpha bank, and is utterly bankrupt, and is under pressure.  Not to mention hiding loads of crap that is worthless.


Wed, 06/13/2012 - 20:06 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

I can see how the whole world is scaried crapless about the downgrades today and their cascading effect for tomorrow...oh...wait.  US stock futures up 1.00


(never mind)

Wed, 06/13/2012 - 22:29 | Link to Comment sablya
sablya's picture

I'm really surprised at the level of complacency in the markets as well.  The $VIX is just under 25.  I just don't understand why there is so little concern for what is happening.  What has to happen to shake things up?  Do people want to see a full collapse before they will take these things seriously?  

Wed, 06/13/2012 - 20:54 | Link to Comment bjfish
bjfish's picture

Is there a Euro bank ETF ?? Or better yet a 3X inverse ETF ??

More ZH articles should add a "trading recom" at the end of story.


Wed, 06/13/2012 - 21:34 | Link to Comment John_Coltrane
John_Coltrane's picture

3x inverse funds are a great way to lose money continuously due to daily compounding and slippage.  You never want to be long these losers, always short them via puts. 

Here's what you do to get leverage with defined losses:  Buy STD  July 7 puts at around $120/contract or BBVA July 7 puts-leverage = 120(contract price)/600 (stock price) = 5x )  Define how much you're willing to lose by the number of contracts you buy.  If STD drops back to around $5 every contract will be worth $120.  If/when it does, and you want more leverage take some profits and roll down to the $6 strike-or just take your money off the table.  The sky's the limit on leverage with options (just took 400% profits on my ANR 17 puts and RSH 8 puts today-both companies are likely going to zero).  This is the way to speculate/gamble against the EU banks.  Don't use any funds you're not prepared to lose.  But the odds are in your favor-otherwise I wouldn't be rolling my June BBVA  puts down and out in duration.  A major bank run favors nationalization which would wipe out the equity and then many would want to buy your puts so say the least.

Disclosure:  Short DB, BBVA, and STD via puts.

Wed, 06/13/2012 - 21:24 | Link to Comment Bangin7GramRocks
Bangin7GramRocks's picture

Stop worrying! They will miracle 4 trillion euros next week and declare victory. Gartman and Cramer will scream that the US market is undervalued and the S&P will go up 200 points. Any questions?

Thu, 06/14/2012 - 01:56 | Link to Comment Mister Ponzi
Mister Ponzi's picture

I wouldn't count on downgrades today. In the last instances of sovereign-related downgrades of companies, it took days or even a few weeks until the company ratings were in line with the sovereign again. I read somewhere that there is even an EU regulation that requires rating agencies to keep a silence period of a few days after a sovereign downgrade. Not sure whether this applies in this case.

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