S&P cuts ratings on five Spanish banks

Ratings agency Standard & Poor's cut the ratings on five Spanish banks on Friday, another blow to the country's ailing banking sector as the nation's deteriorating finances rattle global investors.

But S&P left unchanged its ratings on the country's two biggest banks, Santander and Banco Bilbao Vizcaya Argentaria.

The Standard & Poor's ratings actions come about a week after Moody's Investors Service carried out a sweeping downgrade of Spain's banks, pointing to the government's weakened ability to support lenders.

S&P lowered its rating on Banco Popular, Bankinter and Bankia to 'BB-plus' from 'BBB-minus' and cut the ratings of two other banks, Banca Civica and Banco Financiero de Ahorros. BFA is Bankia's parent company.

The cuts to BB-plus take those banks into junk territory, underscoring risks to the country's financial sector.

Last month S&P cut its credit rating on Spain by two notches, citing expectations the government finances will worsen even more than previously thought.

Spain's banks, awash in bad loans after a real estate boom went bust, are at the heart of the euro zone debt crisis because markets fear a state bailout would put a severe strain on the country's already stretched public finances.

Spain relapsed into an economic recession in the first quarter and likely faces a prolonged slump as the government tries to shrink its budget deficit by slashing spending.