S&P lowers credit ratings on 18 Italian Banks

Ratings agency sees Italian economy still struggling in 2014

S&P lowers credit ratings on 18 Italian Banks

Rome, July 24 - Standard & Poor's cut the long-term credit rating of 17 Italian banks by one notch on Wednesday due to the lingering recession, but did not include two of the country's largest lenders in its announcement. Another lender, Agos Ducato, was downgraded two notches from BB+ to BB-. Intesa Sanpaolo and UniCredit were not included in the downgrade by the agency, which earlier this month downgraded Italy's sovereign rating to BBB from BBB+ with a negative outlook. Both moves will likely increase borrowing costs for the banks involved as well as the government. Standard & Poor's said its concerns stem from the negative outlook for the Italian economy. "In our opinion, Italian banks have to operate in a situation with increasing risks to the economy, which leaves them more vulnerable to a longer and deeper recession...than previously expected," said the rating agency in a statement Already in recession, Italy's gross domestic product (GDP) will contract by 1.9% in 2013, said the agency. This means GDP will have dropped by fully 9% in real terms from 2007 levels by the end of this year, S&P said, adding that it did not expect to see "this trend reverse significantly in 2014".

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