ECONOMY

Credit rating cut on seven banks

Ratings agency Standard and Poor’s lowered its ratings on seven Greek and Cypriot banks yesterday, citing a steeper-than-expected economic downturn domestically and in Southeastern Europe (SEE). Investors on the Athens bourse shrugged off news of the ratings cut as bank shares jumped 7.85 percent, bringing sector gains in the last month to 40 percent. The broader market rose 3.06 percent. The New York-based agency lowered its long-term counterparty credit rating on EFG Eurobank, Piraeus Bank, Emporiki Bank and Cyprus-based Marfin Popular Bank and cut its outlook on National and Alpha to negative from stable. A tough economic scenario will place the Greek and Cypriot bank asset quality and performance under greater pressure than initially anticipated, Standard and Poor’s said. «We have based our expectations partially on our view of inherently higher credit risk in the Greek, Cypriot and SEE markets,» it said in a statement. Asset quality problems are seen stemming from mainly consumer and small and mid-sized enterprise lending and residential mortgages with high-risk features, such as high loan-to-value ratios and foreign currency denominations, it added. Brokers said news of the downgrade had been largely discounted by investors. «It was not a surprise to see Standard and Poor’s lower its ratings after Fitch recently did so,» said an analyst from a leading Athens brokerage. In March, ratings agency Fitch lowered its outlook on Greece’s top four banks to negative from stable, reflecting the challenges of an increasingly difficult environment. Meanwhile, brokerage UBS yesterday increased its price target on six Greek lenders, including National and Eurobank. Alpha Bank ranked as UBS’s top pick, trading at a discount to its European peers, according to press reports. [email protected]