Moody's upgrades ratings of 2 Spanish banks

The ratings agency Moody's has upgraded on Tuesday its ratings for two Spanish Banks, namely Santander and BBVA. Moody's upgraded Santander's debt from Baa2 to Baa1 maintaining the "stable" outlook, the ratings agency said, while also upgrading BBVA's rating from Baa3 to Baa2 with a positive outlook from the previous "stable." Moody's explained that the decision about Santander was the result of "Moody's upgrade of Spain's government bond rating to Baa2 from Baa3" announced on Feb. 21 along with the "current change of the outlook on Spain's rating to positive from stable." It added that Santander's higher rating was "because of its high degree of geographical diversification limits credit linkages to sovereign risk" and "the group's risk-absorption capacity" that remained "resilient despite ongoing asset-quality pressures." The agency praised Santander's ability "to cope with increased provisioning efforts while maintaining very high pre-provision profitability metrics compared with international peers" despite the "negative credit trends in the domestic market". The announcement about BBVA was also due to the "improvement in the Spanish government's creditworthiness reflected in Moody's upgrade of Spain's government" debt announced in February. Moody's also attributed the improvement to the bank' "resilient credit fundamentals underpinned by its stable revenue-generation capacity, its high risk-adjusted profitability and its capacity to generate capital and liquidity in times of stress." It seemed that positive opinions about Spain's economic recovery start to consolidate at a global level after other rating agencies had also shown more optimistic opinions about Spain's economic recovery over the last months. Spain's economy grew by 0.1 percent in the third quarter of 2013 and by 0.2 percent in the last quarter. The government expects to consolidate this growth in 2014 in order to face one of Spain's biggest challenges according to experts, the country's high unemployment rate.