Fitch lowers Santander, BBVA

Fitch Ratings said it downgraded Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA and changed the outlook to negative.

The agency downgraded the banks' long-term issuer default ratings and long-term senior debt ratings to BBB+ from A; short-term issuer default, short-term senior debt and commercial paper ratings to F2 from F1; viability ratings to bbb+ from a; support rating floors to BBB from BBB+; market-linked senior securities to BBB+emr from Aemr; subordinated debt to BBB from A- and preference shares to BB- from BB+. The support ratings were affirmed at 2.

Fitch said the rating actions are primarily based on the downgrade of the Spanish sovereign to BBB/negative from A/negative. They reflect similar concerns to those that have affected the Spanish sovereign rating, in particular, that Spain is forecasted to remain in recession through the remainder of this year and 2013.

Santander's and BBVAs long-term issuer default ratings are one notch above Spain's sovereign rating, reflecting their geographical diversification, strong financial performance and a proven capacity to absorb credit shocks, the agency said.

However, Fitch believes that there is a close link between bank and sovereign credit risk and that it is exceptional for banks to be rated above their domestic sovereign, so the uplift is limited to one notch.

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