S&P ups three Icelandic banks

Standard & Poor's said it raised its long- and short-term counterparty credit ratings on Iceland-based Arion Bank hf., Islandsbanki hf. and Landsbankinn hf. to BBB-/A-3 from BB+/B.

The outlooks on Arion and Islandsbanki are stable, while the outlook on Landsbankinn remains positive.

The upgrades reflect the agency’s view of the improving operating conditions for Iceland's commercial banks.

S&P said the actions follow its review of the banking system, which incorporates the agency’s opinion that economic risks have reduced, given the expectation of lower credit losses and greater stability in the future. As a result, under the banking industry country risk methodology, S&P reassigned Iceland to group 6 from group 7 (on a scale of 1 to 10, with group 1 indicating the lowest-risk banking systems).

Moreover, the agency now anticipates a limited future impact on banks' credit profiles from the financial crisis that started in 2008.

It also considered the July 17 upgrade of Iceland as a sign of improvement and normalization in the banking sector.

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