Moody's cuts eleven European banks' ratings

Moody's has cut the ratings of eleven European banks and said it would cut again if Greece ditched the euro, kicking off a long-awaited round of downgrades for major European institutions.

Moody's Investors Service said today it had taken action against five Dutch banking groups, three French banks and one each from Belgium and Luxembourg.

Moody's cut four Dutch banks by two notches with one moved a single step lower. It kept a negative outlook for Dutch bank and insurer ING Bank, one of those cut two notches, meaning the rating could be cut again.

ING shares were up 2.8 percent, while SNS Reaal, whose banking unit was also downgraded, rose 3.9 percent, buoyed by the better tone in the broader market.

"Today's actions reflect Moody's view that Dutch banks will face difficult operating conditions throughout 2012 and possibly beyond," it said.

The agency said there were heightened risks for creditors amidst elevated uncertainty and downside risks to the economic outlook and fragile investor confidence in Europe.

Moody's agency said it had cut the ratings by two notches to Aa2 for Rabobank Nederland RABOO.UL, to A2 for ING, to A2 for ABN AMRO Bank ABNNV.UL, and to Baa2 for LeasePlan Corporation LEASP.UL.

The long-term debt and deposit ratings for SNS Bank, owned by SNS Reaal, were cut one notch to Baa2. Short-term ratings for all the groups were unchanged.

Moody's said while it had factored in an increased risk of Greece leaving the euro area, this was not its central scenario. "If a Greek exit became Moody's central scenario, further rating actions on European banks could well be needed."

The rating agency stated the negative outlook for ING took into account the bank's funding structure, which relies substantially on wholesale funds and a significant amount of non-domestic deposits. ING received 10 billion euros in state aid during the 2008 financial crisis.

Moody's also cut ratings for French groups Banque Federative du Credit Mutuel, BPCE and CIC, and also KBC from Belgium, and Banque et Caisse d'Epargne de l'Etat from Luxembourg . "To date, we have taken actions on banks in Germany, Austria, Spain, Italy, Portugal, Sweden, Norway, Denmark and Finland," it said.