Among the banks whose rating were lowered were Bank of America, JPMorgan Chase, and Goldman Sachs.
The downgrades, which would also seem to reflect the ratings company’s concern over the uncertainty in Europe and the banks’ exposure to the U.S. housing market, will likely increase the borrowing costs for the banks and could force them to put up billions of dollars in collateral.
The decrease in ratings have been widely anticipated and were in line with a warning that Moody’s issued more than four months ago, when it first stated it would review several banks for potential cuts.
“These downgrades will increase the cost of doing business for banks, either through reduced, or more costly, access to funding or the need to lodge extra collateral with creditors,” said Daiwa Capital Markets analyst Michael Symonds.
Moody’s gave its highest ratings to HSBC and Royal Bank of Canada, which it said had stronger buffers than peers.
Moody’s has been on a tear of late when it comes to downgrades. In June, the company downgraded Spain by three notches, after downgrading 16 Spanish lenders the month before. It also lowered the ratings on seven German and three Austrian lenders earlier this month.
Among the banks that were downgraded yesterday:
- Bank of America was downgraded to Baa2 from Baa1
- JPMorgan Chase was downgraded to A2 from Aa3
- Citigroup was downgraded to Baa2 from A3
- Morgan Stanley was downgraded to Baa1 from A2
- Goldman Sachs was downgraded to A3 from A1
- HSBC was downgraded to Aa3 from Aa2
- Barclay’s was downgraded to A3 from A1
- Moody’s cuts credit ratings of 15 major banks (kansascity.com)
- Moody’s cuts ratings of 15 banks, Morgan Stanley down 2 notches – Reuters UK (uk.reuters.com)
- Report: Massive Moody’s Downgrades to Hit Any Second (jpm, Ms, C, Bac, Gs) (businessinsider.com)
- Moody’s Downgrades Global Banks (huffingtonpost.com)