Moody's cuts Italy bank ratings, warns on capital

MILAN, July 1 (Reuters) - Moody's Investor Service cut long-term credit ratings for 12 Italian banks on Wednesday and warned that lenders might not have bolstered capital enough as the economy slumps.

The credit rating agency concluded a review of 22 banks by cutting the Bank Financial Strength Rating (BFSR) and/or long-term deposit ratings of the dozen lenders' by one notch.

The downgrades overall are "moderate" and less severe than those seen in other major European banking systems because of the credit crisis, Moody's said in a statement.

Although some banks have moved to short up capital bases, "overall pressure on capital may not have been sufficiently addressed and resolved by the Italian banks", it said.

"Unless further supportive measures are taken, some banks' capital cushions could be weakened by asset impairments and provisioning requirements,'" Henry MacNevin, Moody's top Italian banks analyst, said in the statement.

Asset quality is expected to worsen in line with an economic downturn of more than 5 percent this year and joblessness rising to nearly 11 percent by the end of 2010, Moody's said.

Among listed banks, Banca Monte dei Paschi di Siena (BMPS.MI), Italy's fourth-biggest bank by market value, had its BFSR cut to C- from C, with negative outlook. Its long-term deposit rating fell to A1 from Aa3, with stable.

Cooperative lender Banca Popolare di Milano (PMII.MI) had its BFSR cut to C- from C, with stable outlook.

Two banks -- Credito Valtellinese (PCVI.MI) and unit Bancaperta -- had long-term deposit ratings upgraded, both to A3 from Baa1.

Moody's confirmed four banks' long-term and BFSR ratings and cut four lenders' short-term ratings.

Italy's economy, the third-biggest in the euro currency zone, shrank 1 percent last year. It is expected to see growth just above zero in 2010.

(Reporting by Ian Simpson; editing by Elaine Hardcastle)