Moody's cut senior ratings on 25 Spanish banks

LONDON, June 15 (Reuters) - Moody's Investors Service on Monday cut the senior ratings of 25 Spanish banks, citing expectations of further capital pressures.

As well as broader economic pressures, the banks' asset quality indicators continue to point towards a further significant deterioration, Moody's said.

The non-performing loan rate had deteriorated to 4.27 percent at the end of the first quarter of 2009, up from 0.9 percent in December 2007 and 3.37 percent in December 2008.

"The extra cushion that banks had built up over the years against such risks -- which has so far protected their earnings and capital bases -- is becoming increasingly thin," said Moody's analyst Maria Jose Mori.

Moody's cut the ratings of 18 banks by one notch and seven others by two notches after launching a review on the sector last month. The downgrades, which included several of the country's savings banks, were moderate due to expectations that the government would offer support if necessary, Moody's said.

Eight banks continue to have some or all of their ratings under review for further possible downgrade, including BBVA (BBVA.MC: Quote, Profile, Research), whose long-term debt and deposit ratings remain at Aa1 for now but may be cut.

The ratings agency said pressure on capital has not be sufficiently addressed or resolved by Spanish banks.

"Unless some supportive measures are taken by third parties -- by owners, or likely by the government -- some banks' capital cushions will soon be affected by asset impairments and provisioning requirements," Mori added.

(Reporting by Natalie Harrison; editing by Simon Jessop)