TEXT-Fitch cuts Banco Santander and Banco Bilbao Vizcaya Argentaria

June 11 - Fitch Ratings has downgraded Banco Santander's
(Santander) and Banco Bilbao Vizcaya Argentaria's (BBVA) Long-term
Issuer Default Ratings (IDR) to 'BBB+' from 'A' and Viability Ratings (VR) to
'bbb+' from 'a'. The Outlooks on the Long-term IDRs are Negative. At the same
time, Fitch has downgraded Santander UK plc's (San UK) Long-term IDR to 'A' from
'A+' and VR to 'a' from 'a+'. The Outlook on San UK's Long-term IDR is Stable.
Fitch has also taken actions on various other Spanish subsidiaries of Santander
and issuing vehicles of both Santander and BBVA. A full list of rating actions
is at the end of this comment.

The rating actions are primarily based on the downgrade of the Spanish sovereign
to 'BBB'/Negative from 'A'/Negative (see "Fitch Downgrades Spain to 'BBB';
Outlook Negative", dated 7 June 2012 at www.fitchratings.com). They reflect
similar concerns to those that have affected the Spanish sovereign rating, in
particular, that Spain is forecasted to remain in recession through the
remainder of this year and 2013 compared to the previous expectation that the
economy would benefit from a mild recovery in 2013 which directly affects the
banks' volumes of activities in Spain. The Negative Outlook mirrors that on the
sovereign rating. Santander's and BBVA's Long-term IDRs and VRs are sensitive to
a further downgrade of Spain's sovereign rating.

Santander's and BBVA's Long-term IDR are one notch above Spain's sovereign
rating, reflecting their geographical diversification, strong financial
performance and a proven capacity to absorb credit shocks. However, the agency
believes that there is a close link between bank and sovereign credit risk (and
therefore ratings) and it is exceptional for banks to be rated above their
domestic sovereign. Banks tend to own large portfolios of domestic sovereign
debt and are highly exposed to domestic counterparties, meaning profitability
and asset quality are vulnerable to adverse macroeconomic and market trends such
as those being experienced in Spain. Funding access, stability and costs for
banks are also often closely linked to broad perceptions of sovereign risk. For
these reasons, the uplift over the sovereign rating is limited to one notch.

Santander and BBVA benefit from their international diversification in retail
banking, which gives them the capacity to generate earnings internationally,
making up for muted results in Spain and supporting good recurring performance.
This positively differentiates them from the more domestically-focussed Spanish
banks with lower VRs but, in Fitch's opinion, does not entirely mitigate the
rating constraints arising from their domicile. Growth prospects for emerging
markets in which Santander and BBVA subsidiaries operate have been revised down
and they are not entirely immune to global economic trends but earnings from
these markets will continue to contribute significantly to group earnings at
both institutions.

Banking is a highly regulated industry and local regulatory scrutiny and
requirements mean capital and liquidity are not fully transferable within
banking groups, particularly cross border. The benefit to the parent bank of
owning subsidiaries mostly arises from potential dividend flows and the ability,
subject to market conditions and appetite, to sell stakes if needed. Over the
long term, the market value of subsidiaries will invariably fluctuate as banks
and banking systems experience inevitable peaks and troughs.

As a result of the downgrade of the sovereign rating, Fitch has also revised
Santander's and BBVA's Support Rating Floors (SRF) to 'BBB' from 'BBB+'. The
downgrade of Spain indicates a weakening of its ability to support its largest
banks.

Under a recent stress test undertaken by Fitch (see "Fitch: New Base Case
Indicates Spanish Banks Need EUR50bn to EUR60bn Capital, dated 7 June 2012 at
www.fitchratings.com), Santander and BBVA fare better than many medium-sized
banks and savings banks, particularly those with high exposure to the real
estate sector and lower capital bases. They have sufficient pre-impairment
profit generation, reserves and capital to withstand Fitch's stress scenarios
and are therefore rated higher and, based on Fitch's current analysis, will not
require external support.

The Long-term IDRs of Banco Espanol de Credito (Banesto) and Santander Consumer
Finance (SCF) are based on the high probability of support from Santander and
their high integration into the group and are equalised with the parent bank's.
These have also been downgraded to 'BBB+' from 'A'. Banesto's VR is on Rating
Watch Negative (RWN), reflecting concerns over profitability and asset quality
as its activities are focused on Spain. SCF is the parent of a leading consumer
finance group in Europe present in 14 countries at end-2011. It is mainly
focused on vehicle finance and direct lending, with a large proportion of
operations centred in Germany. Fitch considers that SCF cannot be viewed as an
independent entity, so ithas not assigned it a VR. Banesto and SCF's Support
Ratings have been revised to '2' from '1', indicating a weakening of the ability
of the parent to support its subsidiaries. However, they still indicate a high
probability of support, if needed.

Fitch has also placed the Long and Short-term IDRs of Allfunds Bank, S.A.
(Allfunds) on RWN as it is assessing the effect of the downgrade of Santander's
Long-term IDR on these ratings. Allfunds is a small Spanish niche bank
specialising in the distribution of around 20,000 investment funds managed by
over 400 asset management houses. It is a 50:50 joint venture between Santander
and Intesa Sanpaolo ('A-'/Negative).

San UK's IDRs continue to be driven by its standalone strength but are also now
at their SRF, which in turn is driven by its systemic importance to the UK
economy as the second-largest player in the mortgage and retail savings market.
The IDRs do not factor in any support from its parent. The IDRs and the VR
continue to reflect its strong franchise in the UK, its solid asset quality,
comfortable liquidity and relatively strong capital ratios but also factor in
negative pressures on profitability from the macroeconomic, operating and
regulatory environment.

San UK's net exposure to the Santander group is insignificant and is
collateralised. San UK's liquidity position benefited from the issuance of
GBP25bn of medium-term debt in 2011, which reduced the need for short-term
funding and more price-sensitive deposits. The core Tier 1 regulatory capital
ratio was a healthy 11.7% at end-March 2012. San UK is intentionally run as a
separately funded and capitalised bank within the Santander group. Fitch
believes that San UK's funding and capital positions are to a large degree
ring-fenced from the rest of the group due to strong regulatory oversight by the
UK FSA.

As San UK's SRF and VR are at the same level, a further downgrade would only
take place if the financial strength of the UK bank weakens and at the same time
Fitch believes that the propensity of the UK government to support its
systemically important banks has reduced. This is not currently Fitch's base
case in the short to medium term.

The impact on covered bonds issued by Santander, Banco Espanol de Credito and
Abbey National Treasury Services, plc, if any, will be covered in a separate
comment. The ratings of Santander's and BBVA's foreign subsidiaries will also be
addressed in a separate comment.

The rating actions are as follows:

Santander:
Long-term IDR: downgraded to 'BBB+' from 'A'; Outlook Negative
Short-term IDR: downgraded to 'F2' from 'F1'
VR: downgraded to 'bbb+' from 'a'
Support Rating: affirmed at '2'
Support Rating Floor (SRF): revised to 'BBB' from 'BBB+'
Senior unsecured debt long-term rating and certificates of deposit: downgraded
to 'BBB+' from 'A'
Senior unsecured debt short-term rating, commercial paper and certificate of
deposits: downgraded to 'F2' from 'F1'
Market-linked senior unsecured securities: downgraded to 'BBB+emr' from 'Aemr'
Subordinated debt: downgraded to 'BBB' from 'A-'
Preference shares: downgraded to 'BB-' from 'BB+'

Santander Commercial Paper, S.A. Unipersonal
Commercial paper: downgraded to 'F2' from 'F1'

Santander Financial Issuance Ltd.
Subordinated debt: downgraded to 'BBB' from 'A-'

Santander International Debt, S.A. Unipersonal
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating: downgraded to 'F2' from 'F1'

Santander Finance Capital, S.A. Unipersonal
Preference shares: downgraded to 'BB-' from 'BB+'

Santander Finance Preferred, S.A. Unipersonal
Preference shares: downgraded to 'BB-' from 'BB+'

Santander International Preferred, S.A. Unipersonal
Preference shares: downgraded to 'BB-' from 'BB+'

Santander US Debt, S.A.U.
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'

Santander Perpetual, S.A. Unipersonal
Upper Tier 2: Downgraded to 'BB+' from 'BBB'

Banesto
Long-term IDR: downgraded to 'BBB+' from 'A', Outlook Negative
Short-term IDR: downgraded to 'F2' from 'F1'
VR: downgraded to 'bbb+' from 'a-', placed on Rating Watch Negative
Support Rating: downgraded to '2' from '1'
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating and commercial paper: downgraded to 'F2'
from 'F1'
Market-linked senior unsecured securities: downgraded to 'BBB+emr' from 'Aemr'
Subordinated debt: downgraded to 'BBB' from 'A-'
Preference shares: downgraded to 'BB-' from 'BB'

Banesto Financial Products plc
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating: downgraded to 'F2' from 'F1'

Allfunds:
Long-term IDR: 'BBB+' placed on RWN
Short-term IDR: 'F2' placed on RWN
VR: unaffected at 'bbb-'
Support Rating: affirmed at '2'

SCF:
Long-term IDR: downgraded to 'BBB+' from 'A'; Outlook Negative
Short-term IDR: downgraded to 'F2' from 'F1'
Support Rating: downgraded to '2' from '1'
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating and commercial paper: downgraded to 'F2'
from 'F1'
Subordinated debt: downgraded to 'BBB' from 'A-'

San UK:
Long-term IDR: downgraded to 'A' from 'A+'; Outlook Stable
Short-term IDR: affirmed at F1
VR: downgraded to 'a' from 'a+'
Support Rating: affirmed at '1'

SRF: affirmed at 'A'
Senior unsecured debt long-term rating: downgraded to 'A' from 'A+'
Senior unsecured debt short-term rating and commercial paper: affirmed at 'F1'
Market-linked senior unsecured securities: downgraded to 'A' from 'A+'
Subordinated debt: downgraded to 'A-' from 'A'
Upper Tier 2 subordinated debt: downgraded to 'BBB' from 'BBB+'
GBP300m Non cumulative, callable preference shares, XS0502105454: Downgraded to
'BB+' from 'BBB-'
Other Preferred stock: Downgraded to 'BBB-' from' BBB'

Abbey National Treasury Services plc
Long-term IDR: downgraded to 'A' from 'A+'; Stable Outlook
Short-term IDR: affirmed at 'F1'
Guaranteed Debt Programme: affirmed at 'AAA'/'F1+'
Senior unsecured debt long-term rating: downgraded to 'A' from 'A+'
Market-linked senior unsecured securities: downgraded to 'Aemr' from 'A+emr'

BBVA:
Long-term IDR: downgraded to 'BBB+' from 'A', Negative Outlook
Short-term IDR: downgraded to 'F2' from 'F1'
VR: downgraded to 'bbb+' from 'a'
Support Rating: affirmed at '2'
SRF: revised to 'BBB' from 'BBB+'
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating and commercial paper: downgraded to 'F2
from 'F1'
Market-linked senior unsecured securities: downgraded to 'BBB+emr' from 'Aemr'
Subordinated debt: downgraded to 'BBB' from 'A-'
Preference shares: downgraded to 'BB-' from 'BB+'

BBVA Capital Finance, S.A. Unipersonal
Preference shares: downgraded to 'BB-' from 'BB+'
BBVA International Preferred, S.A. Unipersonal
Preference shares: downgraded to 'BB-' from 'BB+'

BBVA Senior Finance, S.A. Unipersonal
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating: downgraded to 'F2' from 'F1'

BBVA U.S. Senior, S.A. Unipersonal
Senior unsecured debt long-term rating: downgraded to 'BBB+' from 'A'
Senior unsecured debt short-term rating: downgraded to 'F2' from 'F1'