Senin, 30 April 2012

Banking giant Santander suffers credit rating downgrade as Spain slips into crisis

Banking giant Santander suffers credit rating downgrade as Spain slips into crisis

By Adrian Lowery

PUBLISHED: 07:53 EST, 30 April 2012 | UPDATED: 10:50 EST, 30 April 2012

   

Santander, the Spanish banking giant with 26.7million British customers, was hit by a credit rating downgrade today from Standard Poor's.

Banco Santander, which last week reported a 25 per cent profits plunge, was one of 11 Spanish banks downgraded by SP.

The agency's move comes after it last week cut the country's credit rating two notches to BBB+ in response to Spain's slide into economic turmoil. Offical data today also showed that the Spanish economy had tipped back into recession.

Under pressure: Santander, which has 26.7m UK customers, has seen profits fall sharply

Under pressure: Santander, which has 26.7m UK customers, has seen profits fall sharply

'The factors behind the downgrade of Spain could have potentially negative implications for our view of the economic risk and industry risk affecting the Spanish banking industry and for our analysis of specific rating factors that drive our stand-alone credit profile assessments on Spanish banks,' SP said.

However, SP did not hit the UK unit of Santander with the full downgrade because its fortunes were more closely tied to the healthier UK economy and its more supportive regulatory system.


The ratings agencies appear to be taking a 'vicious circle' view on the Spanish economy and its banking system: they are concerned about the government's exposure to its ailing banks and therefore its fiscal sustainability, but also see the banking system as vulnerable to the nation's economic and fiscal weakness.   

Spain pays close to 6 per cent on 10-year benchmark bonds, a level some consider to be unsustainable over the long term - and beyond which other failing eurozone economies like Greece and Portugal were forced to ask for bailouts to survive.

Spain's National Statistics Institute confirmed the country's economy shrank 0.3 per cent in the first quarter, following an equal contraction at the close of 2011.

UK hit: Santander took over Alliance Leicester which made bad loans to struggling companies before the financial crisis

UK hit: Santander took over Alliance Leicester which made bad loans to struggling companies before the financial crisis

'Although the figure is not quite as bad as the forecast of a 0.4 per cent fall, do not get carried away with optimism â€" I believe that Spain is close to imploding under austerity and a property bust,' said Louise Cooper, markets analyst at BGC Partners.

'It is following Ireland but without the benefits of a reformed and pro-business economy.'

Spanish unemployment jumped to 24.4 per cent in the first quarter, more than double the EU average and Spain's two largest banks, Santander and BBVA, have suggested they may not buy any more government debt this year.

'The SP downgrade on Spanish banks was already priced in and shares are almost flat or just slightly down.

'What the market is waiting for now is the outcome of a possible downgrade on Spanish banks by Moody's after putting their outlooks under revision a some time ago,' said Nuria Alvarez, analyst at Madrid-based Renta 4.    

Last week Santander blamed i ts poor profits on a rise in bad loans in its home market, the UK and Brazil. It was forced to set aside £2.56billion (up from £1.69billion) in provisions, largely to cover rising loan defaults in Spain.

This prompted profits for the group to fall 24 per cent to £1.31billion from the same period last year.

The Spanish government has ordered banks to book more losses as the recession threatens to throw more homeowners and companies into default. The bank will use about €615million in net capital gains on the sale of its Colombian unit to help offset the property loss writedowns.

But Santiago Lopez of Exane BNP Paribas said 'the main negative surprise came from the UK'.

Here, attributable profits to shareholders fell 39 per cent to £249.9million. This included an increased provision for bad loans to struggling companies made by Alliance Leicester â€" taken over by Santander â€" before the financial crisis.

W eak economic growth, low interest rates and higher funding costs all took their toll too.

Profits in Brazil â€" Santander’s biggest market â€" fell 12 per cent as more consumers defaulted on their debts in a slowing economy.

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

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About 12 months ago I moved my current account to Santander and I also have a cash ISA with them. I have to say that I have received excellent service thus far and when I transferred my current account I enquired about safety as I was aware of the parlous state of the Spanish economy. The answer I received was that although Santander is Spanish owned it still has to comply with British banking regulations and its British operation is, therefore, tantamount to being a British Bank and that any deterioration in the Spanish economy would have no real effect on my current account or cash ISA. How much of that statement is true?

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We are now coming to the time when selling our national assets to overseas buyers is coming back to haunt us.

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I would never bank with these they are so poor at customer service i moved my accounts with them the queue? inside go on for ever and the phone is to india internet aint that great too.

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It's time to move to Lloyds, as being partially owned by the British tax payer, it is one of the safest banks in the UK. What's more the service at Santander is pretty awful.

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Ask yourself who now owns Bradford and Bingley, Abbey, Alliance and Leicester, our water suppliers, gas distribution and electricity? Electricity de France advertise that they supply power to the olympics!!!! Need I say more???..............................................All sold overseas during the Blair/Brown Labour regime, the same regime that relaxed banking regulation till it barely existed and bought in the useless "tripartite" system. They just loved the tax revenues which they then wasted. Need I say more.

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To Roy of Billericay, No I hadn't forgotten TSB, especially as I was a recipient of shares. It was NOT a building society and did NOT belong to its members. I only mentioned building socs, as did you in your original post. - rob boberts, far far away, 30/4/2012 18:47---------Oh Dear! If it did not belong to its customers/members why were they [you?] given cheap shares. The TSB operated under its own enabling Legislation; The Trustee Savings Banks Acts. Counsel`s opinion at the time was that it was owned by its members who held the assets in trust for themselves and other future customers. The `Board` were Trustees - the Assets vested in Custodian Trustees. No Trustee received any payment - they did it for free!! The Act which allowed its sale/privatisation Repealed ALL the previous Acts. Maggies Govt did that. I still feel that Maggie destroyed the idea of unpaid public/civic service to `wind up the market` to make the sale of B Gas a success. Can we let this drop now?

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Your telling me nearly half the UK population are with Santander. I can believe 28million accounts but surely not 28million people. If its true, why??? - PizzaEata, Woking, 30/4/2012 18:28------ If you look at some of the other posts you will see that Santander`s UK operations are based on buying out banks which were previously building societies. Thse societies would have very many `inactive` and `dormant` accounts; Abbey for example was formed in 1849. These account records have to be maintained because Executors/Beneficiaries might still `creep out of the woodwork`. Remember that most Building Societies were small operations originally, confined to small geographical areas. I would guess that 28m refers to ALL ccounts including the inactive/dormant ones. Makes their advertising.PR people feel like `little big boys` though! Because of their poor customer service I just wonder how many active` customers are leaving them each day.

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To Roy of Billericay, No I hadn't forgotten TSB, especially as I was a recipient of shares. It was NOT a building society and did NOT belong to its members. I only mentioned building socs, as did you in your original post.

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Your telling me nearly half the UK population are with Santander. I can believe 28million accounts but surely not 28million people. If its true, why???

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only 1 building society demutualised during the Thatcher premiership (Abbey National). The rules were set to make demutualisation difficult with 75% of the members having to vote in favour. Her government may have allowed it but the members did it and the societies belonged to the members. Why is this wrong? - rob boberts, far far away, 30/4/2012 17:45 SORRY rob but you have forgotton the Trustee Savings Bank [who I worked for at the time] the bank that nobody owned? EXCEPT effectively the customers held it in trust for future generations. Maggie `used` the bank to `wind up the market` by giving shares away and letting customers buy them at a discount. The share price immediately went up -- just what she wanted to get British Gas and BT `away`. The building society members also scrabbled for free shares; their votes were bought. Only Nationwide of the big societies resisted their customers. Perhaps because they were originally The CoOp Permanent Bld Soc.

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