Moody's Downgrade War in Ireland & Lands of PIIGS (AIB, IRE, NBG, STD, BBVA)

Moody’s is at it again with yet another debt rating downgrade in the lands of the PIIGS.  Today came a debt rating cut to four Irish banks and an Irish insurer, and the cut also included some of the government guaranteed liabilities.  The late downgrade by Moody’s pertained to  bank deposits, financial strength, senior debt, and most of the junior securities of Allied Irish Banks plc (NYSE: AIB) and Bank of Ireland (NYSE: IRE), and also on the ratings of Irish Life & Permanent, Irish Nationwide Building Society, and EBS Building Society.

The downgrade should have already been made but this was on the heels of Friday’s sovereign credit rating downgrade.  We saw the same in Greece and elsewhere from ratings agencies last week in the lands of the PIIGS.

Allied Irish Banks plc (NYSE: AIB) is down 4.8% at $1.17 versus a recent low of $0.92 and versus a 52-week low of $0.76.  The Bank of Ireland (NYSE: IRE) is actually up almost 0.4% at $2.56 compared to $1.44 in November.

The rest of the PIIGS are getting hit as well.  In Greece, the National Bank of Greece SA (NYSE: NBG) is down 4.6% at $1.74.  In Spain, Banco Santander, S.A. (NYSE: STD) is down actually up 0.2% at $10.54 and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 0.5% at $10.00.

These downgrades could have been easy to anticipate, even if the severity and number of notches was a more harsh cut than seen before.  Moody’s (and S&P and other ratings agencies) are out systematically making their reviews and following those reviews with debt ratings downgrades.  We have said it before and will say it again: If it is a PIIGS nation, more downgrades are coming; if it is already under formal review for downgrade, then that downgrade will be sooner rather than later.

For those nations not under review, expect a review for a possible downgrade.  Ask yourself this… “How many nations in Europe or other troubled spots in the world are actually about to get a debt rating upgrade?

JON C. OGG