S&P May Downgrade Portugal Again This Week After Banks

(Corrects fourth paragraph in story published yesterday to say that Banco Comercial Portugues is publicly traded and to correct spelling of name.)

Standard & Poor’s said it may downgrade Portugal’s credit rating again this week after cutting long- and short-term counterparty credit ratings today on five Portuguese banks and two related subsidiaries.

“The negative CreditWatch implications on our long-term counterparty credit ratings on the Portuguese banks reflect our negative CreditWatch listing of the sovereign rating, and thus the possibility of a further sovereign downgrade” that may happen “as early as this week,” S&P said in an e-mailed statement.

S&P said it may cut Portugal’s ratings by one notch after downgrading its debt on March 25 by two levels, to BBB from A-, two days after Portuguese Prime Minister Jose Socrates tendered his resignation.

S&P downgraded the counterparty credit ratings on Banco Santander Totta SA, a unit of Spain’s Banco Santander SA; state- owned Caixa Geral de Depositos SA; Banco Espirito Santo SA (BES), Portugal’s biggest publicly traded bank by market value; Banco BPI SA (BPI), the country’s fifth-biggest lender; and Banco Comercial Portugues SA (BCP), the country’s second-biggest publicly traded bank by market value.

The long-term ratings remain on CreditWatch with negative implications, S&P said.

Socrates offered to resign after opposition parties rejected budget cuts aimed at reducing the deficit and staving off a European Union-led bailout. The biggest opposition party, the Social Democrats, say they still support efforts to cut the budget gap to 4.6 percent of gross domestic product this year and 3 percent next, while voting against the current package.

To contact the reporters responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net; Anabela Reis in Lisbon at areis1@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net