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Portugal Banks Lowered By Fitch After Sovereign Downgrade

November 25, 2011

(Adds Fitch comment in fourth paragraph.)

Nov. 25 (Bloomberg) -- Banco Comercial Portugues SA and two other Portuguese banks’ debt ratings were cut below investment grade by Fitch Ratings, after the company downgraded Portuguese government debt.

The long-term issuer default ratings on Banco Comercial, state-owned Caixa Geral de Depositos SA and Banco BPI SA were cut to BB+ from BBB-, Fitch said today in a statement. Caixa Economica Montepio Geral and Banif SGPS SA were kept at BB and B.

The downgrades come after the company cut Portugal’s credit rating to below investment grade yesterday. The outlook for all five banks is negative, Fitch said.

While the banks need to strengthen their capitalization, “their flexibility to do so is likely to become increasingly constrained, particularly due to the weakening economic environment and likely worsening of earnings and asset quality,” Fitch said.

Banco Comercial Portugues was unchanged at 12.5 cents at 3:58 p.m. in Lisbon trading, while Banco BPI was little changed at 41.2 cents.

The downgrades “also reflect the continuing extremely challenging funding environment, which is likely to increase pressure on these banks’ funding and liquidity profiles, despite recent success in improving the proportion of loans that are funded by deposits,” Fitch said.

Prime Minister Pedro Passos Coelho’s government is cutting spending and raising taxes to meet the terms of a 78 billion- euro bailout that earmarks as much as 12 billion euros to recapitalize the lenders. Under the bailout’s terms, Portuguese banks must have a core Tier 1 capital ratio, a measure of financial strength, of at least 9 percent by the end of this year.

The ratio must stay at 9 percent by the end of June after the value of government bond holdings are written down to market prices, and must rise to 10 percent by the end of 2012.

--Editors: Frank Connelly, Keith Campbell

To contact the reporter on this story: Anabela Reis in Lisbon at

To contact the editor responsible for this story: Angela Cullen at

The Aging of Abercrombie & Fitch
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