Spanish banks wonder: what Italian domino effect?

Spain’s banking sector rejected with some simple data at hand the domino-effect buzz renewed after Italian sovereign bonds were hit on Tuesday by a Standard&Poor’s downgrade. In fact, the only Spanish banks with Italian debt are BBVA and La Caixa.

This comment comes from Ahorro Corporación Financiera analysts in Madrid:

“In the early hours of the morning, ratings agency S&P reduced the rating of Italy’s sovereign debt from A + to A, with a negative outlook. Spanish banks barely hold Italian bonds in their portfolios’ balance sheets.

The only financial institutions with some exposure would be BBVA andLa Caixa, with a total declared exposure of €3.898bn  (of which €1.901bn are available-for-sale assets and  €1.712bn at maturity) and €1.269bn (of which €1.210bn are of available-for-sale type).

Given that the differential of the Italian 10-year bond compared to the German is 382 bp, by discounting a much higher probability of default than the rating given  the downgrade should theoretically have no impact on BBVA stock price today.”

About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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