S&P Cuts Ratings on All Argentinian Banks

Standard & Poor's Ratings Services lowered its global scale foreign currency ratings on Banco Hipotecario S.A., Banco Patagonia S.A., Banco de Galicia y Buenos Aires S.A., and Banco de la Provincia de Buenos Aires S.A. to 'CCC-' from 'CCC+'. The outlook on these ratings is negative and reflects the outlook on the sovereign. At the same time, we are placing the 'CCC+' global scale local currency ratings on these banks on CreditWatch with negative implications.

The downgrade of these banks follows a similar action on the Republic of Argentina (foreign currency: CCC-/Negative/C; local currency: CCC+/Negative/C) and the revision of our T&C assessment on it to 'CCC-' from 'CCC+'. We believe that these banks won't overcome a sovereign default stress scenario on its foreign currency.

The CreditWatch listing on the local currency ratings on the banks reflects that we will be assessing the impact of more adverse economic and operating conditions (including the change in variables, such as interest rates, inflation, exchange rate, and regulation) on the banks' creditworthiness.

The downgrade of Argentina reflects the heightened risk of default on its foreign currency debt following a recent decision by the U.S. Supreme Court not to hear the Argentine government's appeal against a previous decision by the U.S. Second Circuit Court of Appeals in favor of plaintiffs against the sovereign. The plaintiffs are bondholders who did not participate in the 2005 and 2010 debt exchanges and who have sought to block payments to bondholders who did participate until they obtain full payment on their claims.

The T&C revision reflects the risk that the government could further tighten its exchange control regime to the extent that it impairs the private-sector's ability to service its foreign currency debt.

The affirmation of the 'CCC+' sovereign local currency ratings reflects our view that the potential disruptions on payments resulting from adverse court rulings are not likely to affect the government's ability to service debt issued in local currency under local law.

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