The Wave Of S&P Ratings’ Upgrades Continues: Now It’s The Spanish Banks

bank spainThe Bank of Spain

On Friday, S&P raised its rating on the main Spanish banks by one notch. The decision came in the wake of the rating upgrade by the same agency for Spain’s public debt on March 23, so its “a logical move,” according to Renta4.

S&P raised its long-term rating on Banco Santander from A- to A, with a stable outlook, the rating on BBVA from BBB+ to A- (stable outlook vs previous positive), and on Caixabank from BBB to BBB+, with a stable outlook. Then Bankia goes from BBB- to BBB (stable outlook vs former positive), Bankinter from BBB to BBB+, with a stable outlook and Banco Sabadell from BBB- to BBB, with a stable outlook. Abanca’s rating was also improved from BB- to BB, with a positive outlook (no change), while the ratings were confirmed for Cecabank and Kutxabank at BBB with a positive outlook. S&P highlighted the improvement in the sector’s financing profile, which it qualifies as more balanced as well as having a lower credit risk.

The country’s improved risk perception is based on three factors: the strength of the economy, the improvement in the external balance and the budget consolidation process. And with positive outlooks.

According to different media outlets, S&P’s decision last Friday to improve the Spanish banks’ ratings was based on a combination of factors, flagging a clear improvement in financing conditions and the benefits they will obtain from the improving economy. Undoubtedly the decisions taken by the ECB during the crisis have facilitated both an improvement in financing costs as well the functioning itself of the market. But these benefits have been channeled towards the real economy, the ultimated objective of these monetary measures. The current dynamic profile of the economy is the result of the effort made by the society to overcome the past imbalances, obtaining the greatest benefit via very favourable financing conditions.

In the view of the Spanish Banking Association, the improved rating is “deserved recognition” for the Spanish banks.

They made a significant effort in terms of consolidation and adjustments during the crisis. Now they are in an adequate position to continue to underpin a future scenario of greater growth and prosperity.

For Bankinter analysts, S&P’s decision also confirms its positive view of the sector in the long-term.

Thanks to the progressive rise in business volumes and the improved credit risk – less provisions – against a favourable backdrop facilitating the increase in RoTE in the long-term.
On Friday April 13 at the market close, Moody’s will revise its credit rating for Spain. It’s foreseeable that it will also raise its rating in line with peers S&P and Fitch. Moody’s current rating is Baa2, which has been in force since February 2014. We recall that both S&P and Fitch have recently raised their credit rating on our country to A- (low credit risk), two notches above that assigned by Moody’s (moderate credit risk). DBRS improved its rating on Spain last Friday from A- to A with a stable outlook, one notch above Fitch and three above Moody’s. We recall that we have a fundamental positive view of the market, even when uncertainties persist in the short-term. Market fundamentals are still good: 1) solid macro, 2)corporate results are beating expectations and 3)financing conditions remain favourable for the time being.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.