Italian banks including Intesa Sanpaolo SpA (ISP) and state-controlled companies such as Enel SpA (ENEL) may have their credit ratings lowered by Standard & Poor’s after the company downgraded Italy for the first-time in five years.
Italy’s rating was lowered yesterday by one level on concern that weakening economic growth and a “fragile” government mean the nation will struggle to reduce the euro- region’s second-largest debt burden. Italy was lowered to A from A+ with a negative outlook four months after the company warned the country risked a downgrade.
“At this stage a downgrade on Italian banks is likely,” said Luca Peviani, who oversees about 1 billion euros ($1.4 billion) of assets as managing director of P&G SGR in Rome. “They have a lot of government bonds in their portfolios, which are losing value, weakening their financial positions.”
Italy follows Spain, Ireland, Portugal, Cyprus and Greece as euro-region countries whose credit rating have been cut this year as fallout from the region’s debt crisis prompts scrutiny of rising debt levels. Italian companies whose ratings are linked to the country’s creditworthiness have been suffering in markets as concern over the country’s solvency grows.
S&P lowered its outlook on Intesa, Mediobanca SpA (MB), and two other banks to negative in May, four days after putting Italy’s sovereign rating on review, because of “their predominantly domestic business profiles.”