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S&P downgrades 3 Argentine banks after sovereign cut

S&P Global Ratings lowered the long-term issuer credit ratings of Banco de Galicia y Buenos Aires SAU, Banco Patagonia SA and Banco de la Provincia de Buenos Aires to B- from B with a negative outlook, citing its recent downgrade action on Argentina's sovereign credit ratings.

The rating agency pointed to financial market turmoil, peso devaluation and skyrocketing interest rates in the country, which weakened the sovereign's financial profile. S&P Global Ratings said the banks are not immune to the adverse market situations in the Argentine economy.

"In the upcoming quarters, we expect domestic financial institutions to continue operating under challenging economic conditions, exacerbated by the recent market turmoil that's eroding economic growth trajectory, and inflation and debt dynamics," the rating agency added.

S&P Global Ratings also expects Argentina's GDP to decrease 2.3% in 2019 and inflation to surge 55% on an annual basis amid a 30% depreciation of the peso. All of these factors hinder credit growth in real terms and banks' asset quality metrics, it noted.

Still, the rating agency pointed out that "adequate provisioning, capitalization, and low credit-to-GDP ratio, given a focus on formal sectors of the economy, will allow banks to cope with additional losses stemming from the weakening asset quality."

The rating agency also affirmed Banco Hipotecario SA's long-term issuer credit rating at B-, but revised the outlook to negative from stable. The short-term issuer credit rating of Banco Patagonia was affirmed at B.

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.