Intesa, Mediobanca Ratings Cut by S&P After Italy’s Downgrade

Intesa Sanpaolo SpA (ISP), Mediobanca SpA (MB) and two other Italian banks had their credit ratings lowered by Standard & Poor’s after the company downgraded Italy on Sept. 20 for the first time in five years.

“The respective rating actions and outlook revisions follow the lowering of the unsolicited long- and short-term sovereign credit ratings on the Republic of Italy,” S&P said yesterday in a report.

Italy’s rating was lowered 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 of the risk of a downgrade.

“We generally cap most bank issuer ratings at the level of the foreign currency long-term rating on the related sovereign,” S&P said in the report.

Intesa, Italy’s second-largest lender, and investment bank Mediobanca were lowered to A, the same level as Italy, with a negative outlook. Eight other banks, including Italy’s biggest lender Unicredit SpA (UCG), had their outlooks changed to negative from stable.

The large amount of Italian sovereign debt held by domestic banks make it likely that S&P would change its ratings on some lenders, Moritz Kraemer, S&P Managing Director of European Sovereign Ratings, said in a conference call on Sept. 20.

Intesa held 64.5 billion euros ($89 billion) of government bonds as of June 30. UniCredit owned 38.7 billion euros of bonds. Monte Paschi di Siena SpA, the third-largest, holds about 25 billion euros of Italian debt.

Findomestic Banca SpA and Cassa di Risparmio di Bologna SpA’s ratings were cut to A from A+.

Italy followed 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.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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