Italian banks hit by credit downgrade threat

MILAN (AP)  Italian banks were down sharply on the Milan stock exchange Friday after ratings agency Moody's said it was considering downgrading their credit worthiness.

Shares in Unicredit, the country's largest bank, were down 8% in late-morning trading on Friday. Intesa Sanpaolo, Italy's second-largest bank, and Monte Paschi were also down.

In a report published late Thursday, Moody's Investors Service placed the long-term debt and deposit ratings of 16 Italian banks and two Italian government-related financial institutions on review for possible downgrade.

The rating agency also changed the outlook to negative from stable on the long-term debt and deposit ratings of a further 13 Italian banks.

Premier Silvio Berlusconi, speaking in Brussels, said Italy's banks are solid.

"We are not worried about the stress tests on our banks, which are very solid, especially after capital increases," Berlusconi said, according to the news agency LaPresse. "Our situation cannot be remotely compared with that of Greece."

Last week, Moody's put Italy's public debt on review for possible downgrade over concerns about low growth and public debt, which at around 120 % of GDP is one of the biggest in Europe.

Moody's dealt Italy another blow recently, placing several Italian-government related issuers on review for possible downgrade. These included energy companies Enel SpA and Eni SpA, engineering and construction company Finmeccanica SpA and Poste Italiane SpA, the nationwide postal service.

It's not alone in voicing concerns about Italy, however. Standard and Poor's recently cut its rating outlook for Italy's debt from stable to negative.

The country's financial system has come under further scrutiny on fears of contagion from the Greek crisis. So far, its bond sales have been easily covered although investors have demanded higher yields.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.