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S&P slaps negative outlook on 4 Argentine banks following sovereign downgrade

S&P Global Ratings on April 8 removed the ratings of four Argentine banks from CreditWatch negative and placed their outlook at negative, following its downgrade of Argentina's sovereign ratings to SD, or selective default.

The affected banks were Banco de Galicia y Buenos Aires SAU, Banco Patagonia SA, Banco de la Provincia de Buenos Aires and Banco Hipotecario SA.

The negative outlook reflects difficult economic conditions that adversely impact banks' credit profiles, further aggravated by the coronavirus pandemic. Banks will see lingering pressures on asset quality, profitability, and potentially on solvency and liquidity if lockdowns continue for a long time, S&P Global Ratings said.

However, the rating agency noted that the removal of the CreditWatch placement "reflects the lessening of imminent factors that could have affected banks related to the re-profiling of the sovereign debt, trends deposits behavior, and potential policy changes under the new administration."

S&P Global Ratings pointed to the timely debt service payments of local governments and financial institutions in the past weeks, which support the sovereign's transfer and convertibility, or T&C, assessment.

"T&C assessment remains higher than the sovereign rating because the government continues to signal its intention that tightened capital controls won't apply to principal and interest payments for non-sovereign entities," the rating agency said.

The downgrade of Argentina's ratings was prompted by the government's plan to postpone payments on its U.S.-dollar-denominated local-law debt.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.