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Troubled lender Banco Popular takes a new hit after Moody's announced that it will downgrade its unsecured debt rating and deposit rating, citing “recent market developments".
The Spanish bank lost more than half of its market value in the past four trading days. Investors are concerned that the lender might run out of time and options to deal with its vast capital deficit. Shares of Popular dropped a further six percent to close at a fresh low of €0.32 on Tuesday.
The ratings agency said it trimmed the bank's long-term deposit ratings from Ba3 to B2 and its senior unsecured debt ratings from B1 to B3.
According to a statement from Moody's, “today's rating action was prompted by recent market developments and the impact that these may have on Banco Popular's financial fundamentals. Moody's believes that the continued negative newsflow related to the future of Banco Popular has negatively impacted customers' and investors' confidence. Banco Popular is under increasing pressure to improve its risk-absorption capacity and accelerate the execution of its de-risking strategy."
The Bank of Spain's head Luis Maria Linde also said he is not prepared to answer questions regarding the situation of Popular, as it runs out of time to find a buyer before the self-imposed June 10 offer deadline.
Popular needs €3-5 billion in additional capital, according to analysts estimates. Shares have declined more than 50 percent last week on concerns that it will not be able to fulfill its plan and might face being wound down.
