Moody's has cut Italy's
credit rating, warning that the country was likely to see a sharp rise in borrowing costs.
The rating was cut two
notches to Baa2 from A3,
two levels above junk status.
http://www.bbc.co.uk/news/business-18824246

Kenyan Banks:
Don't get caught when the music stops
 It's been grand — Within our MEA banks universe, the Kenyan banks have been stronger outperformers in 2012. In our coverage universe, Equity Bank (EBL) and Kenya Commercial Bank are up 31% ytd and 38% ytd. The bank shares have been following the robust operating performance of the industry, which continues to defy the challenging macro-economic and social backdrop. As banks ultimately tend to reflect the macro, we think it is time for the market to pay attention to the risks.
 The market should be concerned about the following:
– Macro disconnect — Since 2007, real GDP growth has contracted twice, the CPI has been a yoyo, the currency has devalued 26%, rates have gone through the roof, and despite all of this, system profits have grown 27% p.a. and the NPL ratio improved to 4% in 2011 (from 11% in 2007) — this should concern us.
– Underprovisioned — We estimate that the six largest banks ('Big 6') may be under provisioned by KES20.8bn (49% of FY11 profits or 12% of FY11 equity).
– Overstated profits — We estimate that IAS 39 adjustments overstated the
profits of Equity Bank in 2007, KCB in 2011, Barclays Bank in 2009, Co-operative
Bank in 2008 and CFC Stanbic in 2008 by 15%, 19%, 23%, 10% and 23%,
respectively.
– Potential mortgage woes — After rising 3-fold since 2000, property prices were
up only 1.4% yoy at 1Q12 and the mortgage book now represents 8% of system
loans. The concern here is the 50% risk weighting on these exposures — the banks cannot afford to get caught in a bubble
– Liquidity mismatch — For the Big 6, 72% of their deposits have a contractual duration of less than 3 months while 80% of their loans have a duration of more than one year — this gap is widening and not shrinking, so it shouldn’t be overlooked.
 Equity Bank, Sell — We downgrade EBL to Sell (from Neutral) and reduce our target price to KES17/share (from KES19/share). We also lower our 2012, 2013 and 2014 EPS forecasts by 9%, 9% and 5% respectively.
 KCB, Neutral — We downgrade KCB to Neutral (from BUY) and reduce our target price to KES23/share (from KES27/share). We also lower our 2012, 2013 and 2014 EPS forecasts by 4%, 9% and 9%, respectively.