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Banking

Watching the watchmen part II

S&P bites the bullet and “pulls the trigger” on global bank ratings downgrades

So, late on Tuesday, ratings agency Standard & Poor’s reviewed its ratings of 37 of the largest financial institutions in the world and made some changes.


Courtesy of CreditSights and S&P:


S&P issuer credit ratings reviewed 
 
Sources: S&P, CreditSights  

Key points to S&P's review, is suitably highlighted here by CreditSights:




As anticipated, S&P pulled the trigger on downgrades of bank ratings globally in line with its new bank ratings criteria.

- BofA, Citi, Goldman Sachs and Morgan Stanley all downgraded by one notch to A-/A-2 at holding company. But A/A-1 preserved at the operating company level for all four companies.

- JPMorgan, Wells Fargo, and Bank of New York Mellon among other large US banks downgraded by one notch. These banks preserve A-1 at the holding company; State Street placed on a negative outlook.

- Within Europe, eight out of 20 groups have been downgraded by one notch. There are no great surprises, and market reaction has been minimal so far. We think some of the relative positioning looks odd, though, and give a reminder that there could still be more changes to come.



But while most market participants have concentrated on the credit rating downgrades of the behemoths of the industry, such as Bank of America and Morgan Stanley, the following is of particular interest:



 S&P raised the ratings of two Chinese banks but put negative outlooks on two of Japan's large banks.


The two Chinese banks have had a raise in ratings, which is usually unheard of in this trading environment. Meanwhile Mitsubishi and Sumitomo had their outlooks downgraded from stable to negative, surely eyes will be turning to Nomura.

When Euromoney spoke to a range of market participants about Nomura, they said that the Japanese investment bank might have to scale back on its international ambitions, after it has continually incurred losses from business abroad. However, market participants say the scaleback might still not be enough to recoup losses or escape a ratings downgrade.

 

For more on this, check out the exclusive story tomorrow on Euromoney.com

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