“UBS AG, Credit Suisse Group AG (CSGN) and Morgan Stanley’s credit ratings may be cut by as many as three levels by Moody’s Investors Service, which is reviewing 17 banks and securities firms with global capital markets operations.
Goldman Sachs Group Inc. (GS), Deutsche Bank AG (DBK),JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) are among companies that may be downgraded by two levels, Moody’s said in a statement, adding that the “guidance is indicative only.” Moody’s today cut some European insurers’ ratings based on risks stemming from the region’s sovereign debt crisis.
The potential downgrades, which may raise borrowing costs and force banks to increase collateral, put the ratings company at odds with bond investors, who are sticking with bets that new capital rules and trading limits will make the financial firms safer in the long run. Funding costs have climbed for banks worldwide as Greece’s debt woes roil markets.
“In the next two years, these big banks will be less robust than they used to be, that’s for sure,” Jim Antos, a Hong Kong-based financial analyst at Mizuho Securities Co., said by telephone. “For any bank that has to raise capital today, it’s already very difficult. This makes it just that much more expensive and difficult.”
Barclays Plc (BARC), BNP Paribas (BNP) SA, Credit Agricole SA,HSBC Holdings Plc (HSBA), Macquarie Group Ltd. (MQG) and Royal Bank of Canada may also be cut by two levels, Moody’s said. Bank of America Corp. (BAC), Nomura Holdings Inc. (8604) Royal Bank of Scotland Group Plc and Societe Generale SA may be lowered by one grade, it said.
Evolving Challenges
“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” Moody’s said. “These difficulties, together with inherent vulnerabilities such as confidence- sensitivity, interconnectedness and opacity of risk, have diminished the longer-term profitability and growth prospects of these firms.”
The 43-member Bloomberg Europe Banks and Financial Services Index fell 2.4 percent as of 8:56 a.m. local time in London. Deutsche Bank shares dropped as much as 4.2 percent to the lowest intraday price since Jan. 30. Barclays declined as much as 3.2 percent while Credit Agricole fell as much as 5 percent and UBS (UBSN) retreated as much as 1.9 percent….”
If you enjoy the content at iBankCoin, please follow us on Twitter
