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Moody's Downgrades Five Portuguese Banks

Moody's Investors Service said it has downgraded the credit ratings of five Portuguese banks, mainly due to an expected further deterioration in asset quality, additional asset risks and lack of access to wholesale funding sources.

Moody's said Wednesday that it is cutting senior debt and deposit ratings for four banks by one notch, aligning their ratings at the same level or one notch below the Ba3 ratings of the Portuguese government debt.

The four banks are Banco Espirito Santo, Banco Internacional do Funchal, Banco BPI and Caixa Geral de Depositos. The debt and deposit ratings of Banco Santander Totta, a subsidiary of Banco Santander S.A., were lowered by two notches to Ba1.

The debt and deposit ratings of Banco Comercial Portugues and of Caixa Economica Montepio Geral were confirmed at Ba3. All ratings have a negative outlook.

Moody's said the move largely reflected its downgrades of the banks' standalone bank financial strength ratings (BFSRs), which are driven by an "expected further deterioration of banks' domestic asset quality and profitability given the country's poor economic outlook."

The downgrades of the BFSRs are also influenced by additional asset risks stemming from banks' substantial holdings of government-related debt and prolonged and ongoing lack of access to private wholesale funding sources.

"While none of these pressures are new, in Moody's view they continue to mount against the backdrop of the ongoing euro debt crisis," the report said.

by RTT Staff Writer

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