Moody's Downgrades 26 Italian Banks

Moody's Investors Service downgraded 26 Italian banks on Tuesday, including the country's largest lenders, as their economic performance weakened and the country's economic outlook remained troubled.

The downgrades included UniCredit SpA (Milan: UCG) and Intesa Sanpaolo SpA (Milan: ISP), the two largest lenders, which were both downgraded to A3 from A2.

“Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access,” Moody’s said in a statement.

“These risks are exacerbated by investor concerns over the sustainability of the Italian government’s debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.”

Italy's austerity measures and structural reforms are weighing on the country's economic outlook, Moody's said.

In February, Moody's downgraded Italy's sovereign debt to A3 from A2, with a negative outlook.

UniCredit SpA shares fell 5.53 percent to 2.53 euros at Tuesday's close. Intesa fell 5.47 percent to 0.97 euros at close.