Egan-Jones Cuts Spain Rating Further on Weak Banks

Tuesday, 22 May 2012 03:57 PM

 

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Egan-Jones Ratings cut Spain's credit level further on Tuesday, citing the same weak banking sector that led the agency to downgrade Spain less than a month earlier.

The firm cut Spain to BB-minus from BB-plus.

"Spain will inevitably be faced with sizable payments to support its banking sector and for its weaker provinces," Egan-Jones said in a statement on Tuesday. "Assets of Spain's largest two banks exceed its GDP."

The ailing banks have become a major worry in the euro zone nation, which slid into recession in the first quarter as austerity measures ate into growth.

Last week Moody's Investors Service carried out a sweeping downgrade of 16 Spanish banks, including Banco Santander , the euro zone's largest bank.

Spain's own sovereign rating has suffered, as well. Standard & Poor's cut its credit rating on Spain by two notches to BBB-plus from A last month.

Spain has an A3 rating from Moody's and an A from Fitch Ratings. All three ratings agencies have a negative outlook on Spain's rating.

Spain has seen its 10-year borrowing costs hover around 6 percent in recent months, a level that many analysts say is unsustainable.

The country is working to trim spending but economists fret those very austerity measures could delay a return to growth.

© 2014 Thomson/Reuters. All rights reserved.

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