Stocks fall off a cliff as Moody's downgrades 15 international banks

American Thinker ^ | 06/22/2012 | Rick Moran

[SeekAndFind]

Moody's Investor Service cut the credit rating of the 6 largest US banks with international arms.

In anticipation of this, and on general economic jitters, stocks tanked 251 points in the second worst day of trading this year.

The downgrade of US banks reflects growing concern about the global economy and the exposore of US companies to the european debt crisis.

Wall Street Journal:

The Moody's Corp. unit reduced Morgan Stanley's rating to Baa1, which is three notches above the junk, or noninvestment grade, status that many bond buyers avoid. The move stands to add to the company's borrowing costs and force it to present billions of dollars in cash or high-grade bonds as collateral.

More important, the downgrade could trim Morgan Stanley's earnings power by cutting market share in high-margin businesses such as derivatives as traders seek out higher-rated trading partners. Questions about major banks' earnings power and capacity to withstand market shocks have weighed on financial stocks since early 2011. Morgan Stanley's shares fell 24 cents, or 1.7%, to $13.96 in 4 p.m. New York Stock Exchange composite trading on Thursday during a broad market selloff. In after-hours trading, the stock was up 3.6%.

In a statement, the company said, "While Moody's revised ratings are better than its initial guidance of up to three notches, we believe the ratings still do not fully reflect the key strategic actions we have taken in recent years."

Over time, a downgrade could mean "the incremental new business could be tougher to win," said Glenn Schorr, an analyst at Nomura Securities. The company's shares have fallen 39% over the past year amid questions about its profit outlook.

But the two-notch rating cut saves Morgan Stanley from a blow to its reputation.

[SeekAndFind]

FOR AMERICAN BANKS, HERE ARE THE MOODY’s DOWNGRADE RESULTS:

J.P. Morgan
New Rating: A2 (2 notches)
Previous Rating: Aa3
Moody’s guidance: Up to a two-notch downgrade
What the Banks said: J.P. Morgan said its costs could hit $3.45 billion for a two-notch downgrade.

Bank of America
New Rating: Baa2 (one notch)
Previous Rating: Baa1
Moody’s guidance: Up to a one-notch downgrade
What the bank said: Bank of America said a one-notch downgrade could deliver a $2.7 billion hit.

Citigroup
New Rating: Baa2 (2 notches)
Previous Rating: A3
Moody’s guidance: Up to a two-notch downgrade
What the bank said: Citi estimated that a hypothetical two-notch downgrade could deliver a $2.1 billion hit.

Goldman Sachs
New Rating: A3 (2 notches)
Previous Rating: A1
Moody’s guidance: Up to a two-notch downgrade
What the bank said: Goldman Sachs said its costs could hit $2.2 billion for a two-notch reduction

Morgan Stanley
New Rating: Baa1 (2 notches)
Previous Rating: A2
Moody’s guidance: Up to a three-notch downgrade
What the bank said: Morgan Stanley said it could pay as much as $9.6 billion for a three-notch downgrade by multiple rating agencies.

[Coldwater Creek]

I have owned BB&T stock for years. One of the largest regional banks in the country. The only time the stock and dividends have gone down is when they were forced to take bail out funds, which were repaid ASAP. UP this morning...

[SeekAndFind]

I am looking out like a hawk at these bank’s CORPORATE BONDS. Yields have probably gone up.

I own Morgan Stanley corporate bonds that mature in 2013 (bought them last year when they were yielding 4.6%).

I plan to hold it to maturity.

[Teacher317]

Wow. That needs to be broadcasted.

[ecomcon]

Heh. Morgan Stanley reduced to “Baal”.

[OldEarlGray]

Citigroup
New Rating: Baa2 (2 notches)
Previous Rating: A3
Moody’s guidance: Up to a two-notch downgrade
What the bank said: Citi estimated that a hypothetical two-notch downgrade could deliver a $2.1 billion hit.

 

Couldn't happen to a nicer bunch of predators.

 

Got A$$Paper?

   

 

Plop Plop fiz fiz, Citidirtbags. 

[Vigilanteman]

I have a very positive image of the Baked Beans & Taters Bank from the days of the Kelo Supreme Court Ruling. Didn't they announce that they would not loan money to develop property taken under Kelo?

If you have a bank like that in your region, it is definitely a keeper.

[Yo-Yo]

As of 10:36 AM EDT, all US indicies are up about 0.40%.

[pgkdan]

Dow’s up 48 point as of 10 AM. Must have been a lot of mattresses off that cliff.

[John W]

It’s early.

[Coldwater Creek]

Yes they did! When the bailouts were forced, the shareholders received a letter from the CEO apoligizing. You could feel the heartfelt sorrow. Cut my dividends 64%, but picking back up. I am a widow, not even monetarly comfortable. Really hurt.

[cherry]

I have about 1700 shares of NBTB stock...the price rarely changes...it has paid out a dividend for 450 plus quarters...but its very small...

but they've been buying up small banks thru out upstate NY and into Vermont, and Pa.....

my hope in keeping them is that there will someday be a stock split...

but even a measly .20 share is better than losing money and is better than the average bank...(ok..I'm deluded)

[Coldwater Creek]

It’s also better than any interest that you might get.