Standard & Poor’s has decided that the corporate credit ratings for the National Bank of Greece S.A. (NYSE: NBG) are affirmed at “CCC/C.” What remains a caution is that the ratings outlook is now Negative. Today’s rating action follows the recapitalization and restructuring of the domestic banks in Greece.

S&P shows that it now expects that the Hellenic Financial Stability Fund and the European Central Bank will continue to provide extraordinary capital and liquidity support to the National Bank of Greece. The “CCC/c” rating applies to the long-term ratings and the short-term counterparty credit ratings for the bank.

Where the fly in the ointment comes into play in the Negative outlook is that the criteria set up for a ratings downgrade would come up if the external support is not considered to be sufficient ti maintain adequate liquidity or solvency. That risk would also arise if S&P worries that the National Bank of Greece becomes more at risk of defaulting on its obligations.

S&P said, “In our view, NBG’s capital and earnings remain very weak.” That is even after considering that the 9.8 billion euro capital increase was completed in June. S&P now estimates that its risk-adjusted capital ratio will remain under 2% for the next 24 months inside the books of the National Bank of Greece. S&P also expects very high credit losses in Greece and sees weakened earnings capacity based upon non-performing assets.

What is hard to imagine here is where the real exit is. Greece’s economics continue to flounder and there are no clear paths to any recovery. The nation’s recovery from meeting the capital raising requirements have been short of expectations, and the ongoing fear of yet another no-confidence vote and disbanding of parliament for another round of public elections remains a continued fear.

NBG shares are down 1.7% at $3.55 in late Wednesday trading against a reverse split-adjusted 52-week trading range of $2.85 to $32.50.

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