Moody's Investors Service on Friday downgraded senior debt and deposit ratings of nine Portuguese banks, citing deterioration of their unsupported financial strength.

Moody's said that it saw increased asset risk for these banks as a direct consequence of the their holdings of Portuguese government debt and the sovereign's downgraded rating.

Furthermore, the agency expected further deterioration of the banks' domestic asset quality due to weak outlook for economic growth in the context of the government's austerity measures.

The liquidity strains of the banks that currently lack access to wholesale funding is also a key driver of the rating action.

The six banks which faced downgrades of both their standalone ratings and their debt and deposit ratings are Caixa Geral de Depositos, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI, Banco Santander Totta, and Caixa Economica Montepio Geral.

Banco Internacional do Funchal and Banco Portugues de Negocios had their debt and deposit rating downgraded as a consequence of the weaker Portuguese sovereign, resulting in a lower rating uplift for these banks' debt ratings. The debt ratings of Espirito Santo Financial Group follow the lower rating of its operating company, BES.

All of the banks' ratings carry a negative outlook with the exception of Banco Portugues de Negocios, which has a developing outlook on all of its ratings.

RTTNews