HBOS CDS widen sharply on S&P downgrade -trader

LONDON, Sept 16 (Reuters) - The cost of insuring HBOS' HBOS.L debt against default surged after Standard & Poor's cut ratings on Britain's biggest home lender one notch to A+, a London-based trader said.

By 1425 GMT, five-year senior credit default swaps on HBOS widened 197.5 basis points to 512.5 basis points, the trader said, meaning it costs 512,500 euros per year to insure 10 million euros of HBOS' senior debt against default. CDS on HBOS' subordinated debt hit around 750 basis points, over 200 basis points wider.

Ratings agency S&P cut HBOS' long-term counterparty credit rating from AA-, citing concerns over its financial profile.

"The rating action reflects Standard & Poor's opinion that HBOS' financial profile is less well positioned to manage the deteriorating environment than 'AA' rated global peers," S&P credit analyst Nigel Greenwood said in a statement.

More broadly, the Markit iTraxx five-year senior financials index ITEFA5Y=IE was at about 150 basis points, 32 basis points wider on the day.

For S&P's statement, please double click on [ID:nWNA4031].

(Reporting by Maya Thatcher)