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Rating Action:

Correction to Text, May 5, 2010 Release: Moody's reviews all rated Portuguese banks for possible downgrade

21 May 2010

Madrid, May 21, 2010 -- Substitute paragraph 15 with the following:

"Banco Santander Totta (BST)

All ratings assigned to Banco Santander Totta and its funding subsidiary (Banco Santander Totta London) have been placed on review for possible downgrade, including the C BFSR, the Aa3 deposit and senior debt ratings, the A1 senior subordinated debt rating and the A3 junior subordinated debt rating. The Prime-1 short-term ratings have been affirmed. All long-term deposit and debt ratings and BFSR have been placed on review for possible downgrade, having previously been on negative outlook."

Revised release follows:

Moody's Investors Service has today placed under review for possible downgrade the senior and junior debt ratings of all ten rated Portuguese banks. The rating action has been triggered by the review for possible downgrade of the Aa2 ratings of the Portuguese Government.

At the same time, the standalone Bank Financial Strength Ratings (BFSRs) for all but one of the banks (Banco Portugues de Negocios, where the BFSR is at E+ already) have been placed on review for possible downgrade to assess the impact of the challenging economic and financial market conditions on the banks' standalone credit profile. (Please see below for a full list of affected institutions and ratings.)

"The review of the banks' debt ratings will assess to what extent a potentially lower-rated government will be able and willing to support its banking system in case of need, especially when bearing in mind the current market headwinds and higher funding costs faced by the Portuguese Government," says Olga Cerqueira, Assistant Vice President and Moody's lead analyst for Portuguese banks. Moody's is concerned about the extent to which the economic difficulties and more challenging market access will weaken the banks' standalone credit profile. While most Portuguese banks have weathered the international financial crisis reasonably well so far, they are highly reliant on wholesale funding. Furthermore, both profitability and asset quality are likely to suffer from the subdued growth prospects over the coming years during which Portugal needs to implement its austerity measures.

Moody's review of the BFSRs will assess the impact of the increasingly adverse economic and financial market conditions on the banks' future performance. In particular, Moody's will assess: (1) the impact on profitability of higher funding costs ; (2) the resilience of banks to different liquidity stresses, for example the closure of capital markets for an extended period; and (3) the impact on asset quality and solvency of a challenged operating environment that will give rise to unemployment, lower consumer disposable income and the de-leveraging process in the small- and medium-sized enterprise (SME) and corporate sectors.

The review of the banks' deposit and debt ratings will take into account: (1) the outcome of the BFSRs' review; (2) the government's ability and willingness to support its banking system (which is currently assessed as Aaa, two notches higher than the government's own Aa2 rating); and (3) the outcome of the review of the sovereign rating. Moody's adds that some ratings may go down by more than one notch.

As the banks' senior and junior subordinated ratings are also impacted by deteriorating credit fundamentals (as indicated by a change to either the senior debt ratings or the BFSRs), Moody's has placed these ratings under review for possible downgrade as well, together with the short-term debt and deposit ratings of all banks, except Banco Santander Totta (BST) and Caixa Geral de Depositos (CGD).

The following ratings were affirmed: The BFSR of Banco Portugues de Negocios at E+, as its low level already incorporates a high likelihood of requiring ongoing third-party support. The short-term debt and deposits ratings of CGD and BST at Prime-1 were also affirmed, as the high level of support from the government for CGD or from its ultimate parent, Banco Santander, (rated Aa2/P-1/B-) for BST, should underpin the Prime-1 rating levels.

Following the sovereign rating action, Moody's has also placed under review for possible downgrade the backed-Aa2 rated long-term senior unsecured debt securities of Banco Comercial Portugues, Banco Espirito Santo, Banif -- Banco Internacional do Funchal and Caixa Geral de Depositos.

The specific ratings affected by today's rating action are as follows:

Banif -- Banco Internacional do Funchal

All ratings assigned to Banif and its funding subsidiaries (Banif Finance Limited and Banif Sucursal Financeira Exterior) have been placed on review for possible downgrade, including the D- BFSR, the Baa1 deposit and senior debt ratings, the Baa2 senior subordinated debt rating, the B1 junior subordinated debt rating, the B3 Tier 1 instruments and the Prime-2 short-term ratings. All ratings have been placed on review for possible downgrade, having previously been on negative outlook.

Banco Comercial Portugues (BCP)

All ratings assigned to Banco Comercial Portugues and its funding subsidiaries (BCP Finance Company, BCP Finance Bank and Banco Comercial Portugues Madeira) have been placed on review for possible downgrade, including the D+ BFSR, the A1 deposit and senior debt ratings, the A2 senior subordinated debt rating, the Ba3 Tier 1 instruments and the Prime-1 short-term ratings. All ratings were placed on review for possible downgrade, having previously been on negative outlook. Furthermore, the long-term deposit ratings of Bank Millennium of Baa2 were also put on review for possible downgrade. BM is a Polish subsidiary of BCP, which owns 65.5% of the bank and has recently contributed to its capital increase. The rating action on BM's supported deposit ratings reflected the similar rating action on parent's BFSR. BM's BFSR of D mapping to the Baseline Credit Assessment of (Ba2) with stable outlook and short-term deposit ratings of P-3 were affirmed.

Banco Espirito Santo (BES)

All ratings assigned to Banco Espirito Santo and its funding subsidiaries (BES Finance Limited, Banco Espirito Santo London Branch, Banco Espirito Santo Cayman Branch, Banco Espirito Santo Madeira Branch, Espirito Santo Plc, Espirito Santo Investment Plc, Banco Espirito Santo NA Capital) have been placed on review for possible downgrade, including the C- BFSR, the A1 deposit and senior debt ratings, the A2 senior subordinated debt rating, the Baa2 junior subordinated debt rating, the Ba1 Tier 1 instruments and the Prime-1 short-term ratings. All ratings have been placed on review for possible downgrade, having previously been on stable outlook.

Banco BPI (BPI)

All ratings assigned to Banco BPI and its funding subsidiaries (BPI Capital Finance, Banco BPI Cayman, Banco BPI Santa Maria, Banco BPI Madeira, Banco BPI Cayman Ltd) have been placed on review for possible downgrade, including the C- BFSR, the A1 deposit and senior debt ratings, the A2 senior subordinated debt rating, the Baa3 junior subordinated debt rating, the Ba2 Tier 1 instruments and the Prime-1 short term ratings. All ratings have been placed on review for possible downgrade, having previously been on negative outlook.

Banco Portugues de Negocios (BPN)

Banco Portugues de Negocios' Baa3 long-term deposit and Prime-3 short term ratings have been placed on review for possible downgrade. The E+ BFSR with a negative outlook has been affirmed. The Baa3/P-3 ratings were placed on review for possible downgrade, having previously had a developing outlook. The outlook on its E+ BFSR remains negative.

Banco Santander Totta (BST)

All ratings assigned to Banco Santander Totta and its funding subsidiary (Banco Santander Totta London) have been placed on review for possible downgrade, including the C BFSR, the Aa3 deposit and senior debt ratings, the A1 senior subordinated debt rating and the A3 junior subordinated debt rating. The Prime-1 short-term ratings have been affirmed. All long-term deposit and debt ratings and BFSR have been placed on review for possible downgrade, having previously been on negative outlook.

Caixa Geral de Depositos (CGD)

All ratings assigned to Caixa Geral de Depositos and its funding subsidiaries (Caixa Geral de Depositos Madeira, Caixa Geral de Depositos Paris, Caixa Geral de Depositos Finance, Caixa Geral de Depositos New York, Caixa Geral Finance Limited) have been placed on review for possible downgrade, including the C- BFSR, the Aa2 deposit and senior debt ratings, the Aa3 senior subordinated debt rating, the Baa1 junior subordinated debt rating and the Baa3 Tier 1 instruments. The Prime-1 short term ratings have been affirmed. All long-term deposit and debt ratings and BFSR were placed on review for possible downgrade, having previously been on negative outlook.

Espirito Santo Financial Group (ESFG)

All ratings assigned to Espirito Santo Financial Group and its funding subsidiaries (Espirito Santo Financiere and ESFG International Limited) have been placed on review for possible downgrade, including the A3 issuer and senior debt ratings, the Baa1 senior subordinated debt rating, the Ba2 Tier 1 instruments and the Prime-2 short-term rating. All ratings have been placed on review for possible downgrade, having previously been on stable outlook.

Banco Itau Europa (Itau Europa)

All ratings assigned to Banco Itau Europa have been placed on review for possible downgrade, including the C- BFSR, the Baa1 deposit and senior debt ratings, the Baa2 senior subordinated debt ratings, the Baa3 junior subordinated debt ratings and the Prime-2 short term ratings. All ratings have been placed on review for possible downgrade, having previously been on negative outlook.

Caixa Economica Montepio Geral (Montepio)

All ratings assigned to Caixa Economica Montepio Geral and its funding subsidiary (Caixa Economica Montepio Geral Cayman Islands Branch) have been placed on review for possible downgrade, including the D BFSR, the Baa1 deposit and senior debt ratings, the Baa2 senior subordinated debt ratings, the Ba3 junior subordinated debt ratings and the Prime-2 short-term ratings. All ratings were placed on review for possible downgrade, having previously been on negative outlook.

The last rating actions on Banif, BCP, BES, BPI, BST, CGD, ESFG, Itaú Europa and Montepio were implemented on 22 April 2010 when Moody's downgraded their hybrid securities/MTN programmes following revisions to Moody's hybrids methodology. The last rating action on BPN was implemented on 30 March 2009, when Moody's assigned a developing outlook to its Baa3 deposit and debt ratings and affirmed the E+ BFSR. The last rating action on Banco Millennium was implemented on 16 September 2009 when the deposit ratings were downgraded to Baa2/Prime-3 from A3/Prime-2 following the downgrade of the parent bank's ratings.

The principal methodologies used in rating these issuers are Moody's "Bank Financial Strength Ratings: Global Methodology", published in February 2007, "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007, and "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt", published in November 2009, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

Banif is headquartered in Funchal, Portugal. At 31 December 2009 it had total unaudited assets of EUR 11.6 billion.

BCP is headquartered in Oporto, Portugal. At 31 December 2009 it had total assets of EUR 95.6 billion.

BM is headquartered in Warsaw, Poland. At 31 December 2009 it reported IFRS consolidated total assets of PLN44.9 billion (EUR10.9 billion).

BES is headquartered in Lisbon, Portugal. At 31 December 2009 it had total assets of EUR 82.3 billion.

BPI is headquartered in Lisbon, Portugal. At 31 December 2009 it had total assets of EUR 47.5 billion.

BPN is headquartered in Lisbon, Portugal. At 31 December 2008 it had total assets of EUR 8.2 billion.

BST is headquartered in Lisbon, Portugal. At 31 December 2009 it had total unaudited assets of EUR 45.7 billion.

CGD is headquartered in Lisbon, Portugal. At 31 December 2009 it had total assets of EUR 120.9 billion.

ESFG is headquartered in Luxembourg. At 31 December 2009 it had total assets of EUR 85.3 billion.

Itaú Europa is headquartered in Lisbon, Portugal. At 31 December 2009 it had total assets of EUR 5.1 billion.

Montepio is headquartered in Lisbon, Portugal. At 31 December 2009 it had total assets of EUR 17.2 billion.

London
Johannes Wassenberg
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Madrid
Olga Cerqueira
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Correction to Text, May 5, 2010 Release: Moody's reviews all rated Portuguese banks for possible downgrade
No Related Data.
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