Moody's downgrades Portugal banks on funding, debt concerns

Nine Portuguese banks had their debt ratings cut by Moody’s Investors Service by one or two levels, which cited concern about funding, bad loans and holdings of government debt.

Moody’s cut the “standalone” debt ratings of three banks, Banco Espirito Santo SA (BES), Banco Comercial Portugues SA (BCP) and Banco BPI SA, by two levels, the ratings company said in a statement on Friday.

The downgrades for BCP and BPI reflected Greek sovereign debt holdings, potential lack of access to wholesale debt markets and “increased asset risk” caused by holdings of Portuguese government bonds, Moody’s said. The moves conclude a review begun on July 15, when Portugal’s sovereign rating was cut to Ba2 with a negative outlook from Baa1.

Moody’s cut BES’s standalone rating to Ba3 from D+/Ba1 and BPI’s to Ba2 from Baa3. “BES has traditionally been the most active Portuguese bank in the capital markets as well as a wholesale-oriented bank displaying a high reliance on wholesale funding,” Moody’s said.

BCP was cut to B1 from D/Ba2, in part because of its Greek subsidiary, Moody’s said. The ratings company said it cut standalone ratings one or two notches for six of the nine banks that had their senior debt ratings reduced on Friday.

Moody’s cut Caixa Geral de Depositos’ debt and deposit ratings to Ba2 from Baa1 and Banco Santander Totta to Baa2 from Baa1. Banif SGPS SA was cut to Ba3 from Ba2, Moody’s said. The outlook on the ratings for all the affected banks is negative, with the exception of Banco Portugues de Negocios SGPS, which has a developing outlook, Moody’s said.