Dutch and Swiss banks top a new S&P ranking of creditworthiness of European banks. Not surprisingly, Irish and Greek banks are at the bottom of the list.
The gap between European banks with the strongest and weakest creditworthiness is wider now than it has been in the past 30 years, Standard & Poor’s Ratings Services said in the report.
“The financial crisis and recession forced a restructuring of the industry and amplified prior differences in creditworthiness,” said Standard & Poor’s credit analyst Scott Bugie. “Furthermore, the link between European bank creditworthiness and government support has never been more important in our view.”
In the report, Standard & Poor’s presents, for the first time, the stand-alone credit profiles (SACPs) on the 100 largest financial institutions it rates in Europe, alongside their issuer credit ratings (ICRs). The list comprises the banks that Standard & Poor’s rates from mature European economies, excluding the newer members of the European Union from Central and Eastern Europe. We started to roll out SACPs for the banks we rate since the publication of ”General Criteria: Stand-Alone Credit Profiles: One Component Of A Rating,” on Oct. 1, 2010 (complimentary).
The list illustrates the pockets of difficulties in the European banking industry. In particular, banks in Ireland, Greece, and, to a lesser extent, Portugal, have suffered due to the continuing recession in all three countries and their severely restricted access to wholesale funding due to the interdependence of bank and sovereign creditworthiness.
Irish banks helped fuel the real estate boom in the country, and are still reeling from the equally spectacular bust. Eight of the nine banks in the list with speculative-grade ICRs (that is, ‘BB+’ and lower) are in Ireland and Greece.
German Landesbanks and real estate specialists such as the Hypo Real Estate Group and some regional Spanish savings banks (most of which Standard & Poor’s doesn’t rate) point up weaknesses with certain business models and lending segments (notably the Spanish real estate construction industry) in the European banking industry.
Dutch and Swiss banks occupy the top nine positions on the list.