Ratings agency Standard & Poor's said Friday that it has lowered its ratings on 34 Italy-based financial institutions, including UniCredit SpA and Intesa Sanpaolo SpA.

The move follows S&P's downgrade of Italy's sovereign credit rating last month to BBB+ and reflects the revision of the rating agency's Banking Industry Country Risk Assessment, or BICRA, on Italy to group '4' from group '3', and of S&P's economic risk and industry risk scores on Italy to '4' from '3'.

S&P lowered the long-term ratings of UniCredit, Italy's biggest bank, and Intesa, the second biggest, to BBB+ from A. Both have a negative outlook.

"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," S&P said in a separate statement.

"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. We believe this may be negative for the Italian banking industry's stability," the ratings agency added.

Additionally, S&P affirmed its ratings on two Italian financial institutions and removed them from CreditWatch with negative implications. They are Banca di Credito Cooperativo di Conversano S.c.r.l and Istituto Centrale delle Banche Popolari Italiane SpA.

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