03 January 2012
Most major Spanish banks are at risk of downgrade, according to a new report by credit rating agency Fitch. Labelling the economic outlook as "negative", Fitch revealed that it had put the majority of large financial institutions in the country on "rating watch negative", with a view to future downgrades.
"A further intensification of the eurozone crisis, a deteriorating macro environment within Spain and across Europe, increased market volatility and risk aversion, could negatively affect bank credit profiles," said the managing director of Fitch's financial institutions group Maria Jose Lockerbie. "The weak economic environment in Spain, high unemployment and property sector problems will continue to constrain banks' business volumes, as well as eroding asset quality."
For 2012 and 2013, Fitch projected Spanish gross domestic product growth to reach just 0.0 per cent and 1.0 per cent respectively - revised down from 0.5 per cent and 1.5 per cent previously. The list of Spanish banks includes Banco Santander and Banco Bilbao Vizcaya Argentaria. Exposure to the ailing property market remains a major risk for the large Spanish banks.
And the deterioration in funding conditions for the Spanish sovereign due to the eurozone debt crisis has affected banks' costs and access – claimed Fitch. A spokesman for the rating agency said: "Weak loan demand and the European Banking Authority's 9 per cent core capital requirement by end of June 2012 have accelerated deleveraging in Spain - with banks granting loans only selectively. Capital at most of the major banks needs strengthening."