DBRS Morningstar Takes Actions on 5 Spanish Banks Amidst Heightened Uncertainty Around COVID-19

DBRS Morningstar has published a commentary explaining the rationale behind the rating action taken on 5 Spanish banks.

Key Highlights include:
• DBRS Morningstar took rating actions on 5 Spanish banks. In particular, the ratings of Banco de Sabadell, S.A. and Bankinter S.A. were confirmed, but the Trend was revised to Negative from Stable. The ratings of Bankia SA and Caja Rural de Granada, S.C.C. were confirmed, but the Trend revised to Stable from Positive. Lastly, the ratings of Liberbank S.A. were confirmed at the current level with a Stable trend
• The wide and growing scale of economic and market disruptions resulting from COVID-19 poses significant operational challenges and will put pressure on the banks’ revenues, profits and asset quality at least for 2020. A prolonged crisis could add further downward rating pressure on all Spanish banks.
• Before the COVID-19 outbreak, some banks in Spain were close to being upgraded. As a result, there are differing rating actions taken today, as some banks were positioned strongly in their rating category and experiencing positive rating pressure whereas others were closer to the bottom of their rating category.
• DBRS Morningstar has taken into consideration which banks and business models are expected to suffer more under the current environment. In particular, we highlight four factors: i) Exposure to SMEs, ii) Mortgage Book Quality, iii) Operating Region and iv) Sector Exposures.

“Spanish banks are at a better starting point now than they were facing the 2012 financial crisis. However, a prolonged crisis could add further downward rating pressure on all Spanish banks.” Said Pablo Manzano, Vice President.

Contacts
Pablo Manzano, CFA
Vice President - Global FIG
+34 91903 6502
[email protected]

Arnaud Journois
Vice President - Global FIG
+49 (69) 8088 3526
[email protected]

Elisabeth Rudman
Managing Director, Head of European FIG - Global FIG
+44 (20) 7855 6655
[email protected]