Ratings agency Standard & Poor's on Friday lowered its ratings on 15 Italian financial institutions, citing increased credit risk for the country's economy and banks. Ratings on some major banks, including Italy's two biggest, were affirmed.
"With Italy facing a potentially deeper and more prolonged recession than we had originally anticipated, we think Italian banks' vulnerability to credit risk in the economy is rising," S&P said in a statement.
"In this context, the combined effect of mounting problem assets and reduced coverage of loan loss reserves makes banks more vulnerable to the impact of higher credit losses particularly in the event of deterioration in the collateral values of assets," it said.
S&P cut Banca Monte dei Paschi di Siena SpA to BBB-minus, just one notch above junk, from BBB, .
Banca Carige SpA fared less well, losing its BBB-minus investment-grade rating in a cut to BB-plus.
S&P also cut Dexia Crediop SpA, the Italian public financing arm of bailed-out Franco-Belgian bank Dexia, to B-plus from BB-minus.
Other banks saw their ratings affirmed, including Mediobanca SpA, Intesa Sanpaolo SpA and UniCredit SpA at BBB-plus, all still investment grade. UniCredit is Italy's largest bank, and Intesa is No. 2.
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