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S&P downgrades 34 Italian banks

• www.reuters.com

(Reuters) - Rating agency Standard & Poor's downgraded 34 Italian banks on Friday, including heavyweights UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI), citing a reduced ability to roll over their wholesale debt and expected weak profitability.

The move follows S&P's downgrade of Italy's sovereign rating last month to BBB+, part of a mass downgrade of nine euro zone countries.

In a statement, S&P said its so-called Banking Industry Country Risk Assessment had worsened to group 4 from group 3 -- out of 10 groups -- reflecting its more negative view on Italy's banking system.

"Italy's vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks' significantly diminished ability to roll over their wholesale debt," it said.

"We anticipate persistently weak profitability for Italian banks in the next few years, and a risk-adjusted return on core banking products that may not be sufficient for banks to meet their cost of capital.


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