Moody's downgrades Greek banks' deposit ratings to Caa3; negative outlooks

Moody's Investors Service has today downgraded to Caa3 from Caa2 the long-term deposit and senior debt ratings of three Greek banks: Piraeus Bank S.A., National Bank of Greece S.A., Alpha Bank AE. At the same time, the rating agency confirmed the Caa3 long-term deposit and senior debt ratings of Eurobank Ergasias S.A. and Attica Bank S.A.. All banks' long-term deposit and senior debt ratings carry negative outlooks.

Today's rating action is primarily driven by the continued deterioration in the banks' funding and liquidity, including sustained deposit outflows and the increased risk of capital controls. Additionally, the rating action also takes into account (1) the weakening operating environment, which will aggravate asset quality pressures and constrain banks' earnings generating capacity, and (2) the high proportion of deferred tax assets (DTAs) and Greek sovereign exposures that undermine the banks' capital and solvency. Today's bank rating action follows the deterioration of the Greek government's credit profile, as reflected by the downgrade of Greece's sovereign rating to Caa2 (negative) from Caa1 and the lowering of its deposit ceiling to Caa3 from Caa1