Europe's Top Non-Financial Firms to Keep Top Credit Ratings

The top 50 European banks, financial and industrial companies are facing the worst economic and credit outlook in decades, and the expected downturn in profitability in 2009 could result in negative rating actions, according to a new report by Standard Poor’s.  Still, S&P expects the top non-financial firms to maintain high credit ratings.

The downshift in the European corporate sector appears to have only just begun. Lower demand, higher uncertainty resulting from the financial crisis and the emergence of credit rationing are, in the future, likely to affect the key ratios that we track in our sample of top 50 corporate borrowers.

S & P noted that several of the major financial players in Europe might benefit from a shake-out in the sector, including the U.K.’s Lloyds TSB Group PLC (LYG) and Spain’s Banco Santander S.A. (STD).

So far, nonfinancial European companies have shown little evidence of stress, but that may change in 2009, S & P predicted, as the fallout from the housing decline continues and the global economy deteriorates. The ratings agency, nevertheless, expects the top 50 rated European firms to successfully weather the downturn as they have in previous recessions.

Despite the current level of uncertainty, we expect the overall credit quality of this high-profile group to remain in investment grade, with a median rating in the ‘A’ category.

For details, see “Banks Under Pressure, Corporate and Insurance Firms Stay the Course as Europe’s Top 50 Borrowers Wrestle Financial Uncertainty.”