The rating actions are primarily based on the downgrade of the Spanish sovereign to 'BBB'/Negative from 'A'/Negative, said Fitch in a statement. "They reflect similar concerns to those that have affected the Spanish sovereign rating, in particular, that Spain is forecasted to remain in recession through the remainder of this year and 2013 compared to the previous expectation that the economy would benefit from a mild recovery in 2013 which directly affects the banks' volumes of activities in Spain".
Banks hold Negative Outlook, mirroring that on Spanish sovereign rating and Santander's and BBVA's are sensitive to a further downgrade of Spain.
Even though it is exceptional for banks to be rated above their domestic sovereign, both banks are one notch above Spain's rating, reflecting their geographical diversification, strong financial performance and a proven capacity to absorb credit shocks, according to Fitch.
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