Santander, Banco Bilbao Vizcaya Argentaria and La Caixa were spared downgrades yesterday (Thursday) as Moody’s lowered the ratings of 30 of the 40 Spanish banks rated by the agency. Fifteen banks fell by two notches, five banks by three or four, and cédulas downgrades are now expected.

Moody’s cited as reasons for its move heightened financial pressures, weakening support in Europe, and sector consolidation that will lessen the systemic importance of smaller and regional banks.

The rating action falls come on the heels of a downgrade of Spanish sovereign debt, from Aa1 to Aa2 on 10 March.

“The outlook of most banks’ senior debt and deposit ratings remains negative,” said the rating agency, “reflecting the negative outlook on the sovereign rating and the negative outlook on banks’ standalone credit profiles, given the challenging operating environment in Spain.”

An LBBW analyst said his clients were calling, trying to determine how the Moody’s action will affect their cédulas holdings.

“Some of the investors might have to sell some of their covered bonds if they drop below a certain level,” he said. “Take Banco Pastor’s cédulas as an example, which are currently sitting at triple-A.

“The issuer was downgraded from A3 to Ba1 and if you have a look at the metrics, the resulting maximum covered bond rating would be Baa1. That implies a seven notch downgrade; it’s really quite heavy.”

RBS senior analyst Frank Will said Moody’s actions were not unexpected.

“The move is not a big surprise and we continue to like Santander and BBVA in Spain whilst we remain underweight in the caja sector,” he said.