Fitch placed the BBB rating of Bankia and the BB rating of its parent, Banco Financiero y de Ahorros, on Rating Watch Negative yesterday (Thursday), because of its assessment that there are pressures on the likelihood of future support for the banks after they received government aid at the end of last year.

The rating action follows a review of the banks’ credit profiles after they received capital support from Spain’s Fund for Orderly Bank Restructuring (FROB) on 28 November, said Fitch.

Fitch said that the negative review on Bankia’s rating reflects potential pressures on the propensity of future government support being available. Bankia is substantially downsizing its franchise and this will result in a smaller institution of reduced systemic importance, said the rating agency.

“In its assessment of support, Fitch also notes the intent within the EU to reduce implicit state support for banks,” said the rating agency.

The negative review on Banco Financiero y de Ahorros’s BB rating takes into account pressures on potential additional support arising from the institution’s effective status as a bank holding company, rather than as an active deposit-taking bank, said the rating agency.

However, Fitch upgraded the Viability Rating of Bankia and Banco Financiero y de Ahorros to b and b-, respectively, as a result of the capital support the banks received from FROB.

A covered bond analyst said that although Fitch does not rate Bankia covered bonds a one notch downgrade of the Spanish bank could trigger a lowering of Fitch’s “one-size-fits-all” BBB rating for multi-cedulas given that Bankia has a significant share in most such structures.

Fitch also upgraded the Viability Rating of NCG Banco from f to b+ and said that it faces similar pressures to Bankia. NCG Banco’s issuer default rating of BBB+ was already on Rating Watch Negative, and this was maintained.