Five Dutch lenders, including ING Groep NV and state-owned ABN Amro NV were downgraded on Friday due to the effects of the weak Dutch economy and falling house prices. Some French banks were also downgraded.
"Dutch banks will face difficult operation conditions throughout 2012 and possibly beyond," the ratings agency said.
The move follows a review announced on Feb. 15. Moody's said all the downgraded banks have large mortgage books and high reliance on raising funds from other banks.
Among the big banks, it cut the long-term debt and deposit ratings for Rabobank Nederland by two notches to Aa2. ING Bank and ABN Amro Bank were cut by two notches to A2. All remain "investment grade," meaning the agency still believes they will be able to repay their debts in most foreseeable scenarios, and conservative investors such as pension funds will still be able to invest in the banks' debt.
Shares in ING rose 2.1 per cent to C4.795 ($6.06) in early trading, possibly in relief that it wasn't downgraded further. Analysts have been worried about the company's C38 billion portfolio of investments in Spain, much of it mortgage-linked.
On Thursday ING said it is confident enough in its finances that it intends to repay this year some of the remaining C3 billion it still owes the Dutch state after a 2008 bailout.
Rabobank is a privately-held co-operative bank and ABN has been owned by the Dutch state since it was nationalized along with Belgium's Fortis during the fall of 2008. The now-defunct Fortis was finishing a takeover of ABN when it began sliding toward bankruptcy and the Netherlands stepped in to take over the Dutch operations of both and avert a meltdown of the country's banking system.
Moody's said the big three banks benefit from their lock on the Dutch retail banking market, and it believes the Dutch state can and would step in again to save them if need be.
"The long-term debt and deposit ratings for four of the five Dutch banking groups downgraded today continue to be positioned above their standalone credit assessments, reflecting Moody's assumption of a high likelihood of systemic support, if needed," it said.
Moody's also cut its ratings for two smaller lenders on Friday, LeasePlan Corporation and SNS Bank to Baa2. It gave all a stable outlook for all except ING, which means their ratings are unlikely to change again in the near term.
The ratings agency also downgraded three French banks – Banque Federative du Credit Mutuel, BPCE and CIC – as well as KBC from Belgium, and Banque et Caisse d'Epargne de l'Etat from Luxembourg.
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