MILAN, March 22 (Reuters) - Ratings agency Standard & Poor's cut its long-term credit ratings on Italian mutual bank Banco Popolare by one notch to the non-investment grade level of 'BB+', citing concerns over credit losses amid Italy's economic downturn.
"Banco Popolare appears increasingly vulnerable to higher-than-anticipated credit losses from its mounting non-performing assets, for which it has a moderate level of reserve coverage," S&P said in a statement on Friday.
The ratings agency said the outlook was negative to reflect the possibility that the bank's financial profile, in particular its capital position, could weaken further over the next 12-18 months.
Banco Popolare, Italy's fourth largest bank, said in a statement that S&P's judgement was "incorrect" because it did not take into account, among other things, the improvement in its Core Tier 1 capital adequacy ratio, as well as its funding and liquidity profile.
The bank also said its gross impaired loans rose 17.5 percent in 2012, below its main competitors' average increase of 24.6 percent.
The bank reported last week a full-year net loss of 627 million euros ($815 million) after it took extraordinary writedowns in the fourth quarter. ($1 = 0.7694 euros) (Reporting by Danilo Masoni; Editing by Richard Chang)