S&P cuts rating on 18 medium-sized Italian banks

Ratings agency Standard & Poor's cut its long-term counterparty credit ratings by one notch on 18 medium-sized Italian banks, including Unione di Banche Italiane and Credito Emiliano , citing a worsening economic outlook.

The ratings for UBI and Credem were lowered to 'BBB-', that of Banca Popolare di Milano and Banco Popolare Societa Cooperativa to 'BB', while Banca Carige was cut to 'BB-'.

Other affected banks included FGA Capital, Iccrea Holding, MedioCredito Centrale, Banca Popolare di Vicenza, Veneto Banca, Banca Popolare dell'Emilia Romagna and Unipol Banca.

"Italian banks are operating in an environment with higher economic risks, leaving them more exposed to a deeper and longer recession in Italy than we had previously anticipated," S&P said in a statement.

"Banks face tough operating conditions, which we believe could further weaken their financial profiles, notably in terms of asset quality and capital and earnings."

The ratings agency affirmed its ratings on Italy's two biggest banks, UniCredit and Intesa Sanpaolo .

The outlook on the long-term ratings on all Italian banks remains negative, apart from that on Banca Carige and Dexia Crediop, whose ratings remain on CreditWatch negative, it added.

The moves followed an S&P downgrade of Italy's sovereign credit rating to BBB from BBB+, with a negative outlook, earlier in July.

(Reporting by Agnieszka Flak; Editing by David Evans)