Moody’s puts seven Portuguese banks on negative watch

13 June 2011

Lisbon, Portugal, 13 June – Credit rating agency Moody’s Thursday put seven Portuguese banks on negative watch with a view to a potential rating cut, explaining that the decision was due to the difficult operating environment and pressure on Portuguese sovereign debt.

The banks are Caixa Geral de Depósitos (CGD), Comercial Português (BCP), Espírito Santo (BES), Santander Totta, BPI, Montepio Geral and Banco Internacional do Funchal (Banif).

According to Moody’s, a rating cut on these Portuguese banks has become more likely due to, “the increasingly challenging operating climate in which the Portuguese banks operate, which will likely put pressure on their return and the quality of their assets, whilst restrictions on access to credit markets may also be tightened.”

Moody’s also said that the negative watch was due to pressure on the credit profile of the Portuguese Republic, whose rating was also being watched for a potential cut.

On analysing the Portuguese economy Moody’s said that it “remains very weak and is likely to contract in 2011, with uncertain prospects for 2012, partly due to the government’s significant austerity efforts. These adverse economic conditions are likely to weaken the profitability and quality of banks’ assets making it even more difficult to improve their credit profiles and increase their capital to meet the minimum requirements, which are rising.” (macauhub)

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