S&P lowers its credit rating for Italian bank

Agence France-Presse

The long-term rating was lowered late Wednesday from A+ to A, while the short-term rating was kept stable at A-1. The downgrade came after Unicredit reported a collapse in profits and said it would seek state aid.

"The downgrade reflects our expectation that worsening macroeconomic conditions in Central and Eastern Europe as well as in Western Europe will lead to high asset quality and profitability pressures for UniCredit in 2009 and 2010," said Standard & Poor's credit analyst Renato Panichi.

Unicredit on Wednesday said it would request up to 4 billion euros ($5.4 billion) in state aid from Italy and Austria and reported its profits fell 38 percent in 2008, with a plunge of 56.9 percent in the fourth quarter of last year alone.

The bank said it had been hit by a "severe financial crisis."

Unicredit's share price has come under pressure recently because of the bank's exposure in Central and Eastern Europe, where many once-buoyant economies have been plunged into a severe credit crunch and economic crisis.

Last month, credit risk rating agency Moody's warned that Western European banks involved in the former Soviet bloc would face "continuous" downward pressure on their ratings because of the exposure.Unicredit employs more than 174,000 people and has over 10,000 branches.