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Bank downgrades ‘backward-looking’, complains RBS

Moody's downgrades RBS, Barclays, HSBC and Lloyds among other global banks.

 
Bank downgrades ‘backward-looking’, complains RBS

Royal Bank of Scotland (RBS.L) has hit out at ratings agency Moody's for its ‘backward-looking’ decision to downgrade the group alongside 14 other banks last night.

Moody’s downgraded 15 of the world’s biggest banks that ‘have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities’.

Moody's has taken action on the following holding company ratings:

Bank of America Corporation

Long-term senior unsecured debt to Baa2 from Baa1, outlook negative; Short-term P-2 affirmed

Barclays plc

Long-term issuer rating to A3 from A1, outlook negative; Short-term to P-2 from P-1

Citigroup Inc.

Long-term senior debt to Baa2 from A3, outlook negative; short-term P-2 affirmed

Credit Suisse Group AG

Provisional senior debt to (P)A2 from (P)Aa2, outlook stable; Provisional Short-term (P)P-1 affirmed

The Goldman Sachs Group, Inc.

Long-term senior unsecured debt to A3 from A1, outlook negative; Short-term to P-2 from P-1

HSBC Holdings plc

Long-term senior debt to Aa3 from Aa2, outlook negative; Provisional Short-term (P)P-1 affirmed

JPMorgan Chase & Co.

Long-term senior debt to A2 from Aa3, outlook negative; Short-term P-1 affirmed

Morgan Stanley

Long-term senior unsecured debt to Baa1 from A2; outlook negative; Short-term to P-2 from P-1

Royal Bank of Scotland Group plc

Long-term senior debt to Baa1 from A3, outlook negative; Short-term P-2 affirmed

Moody's has taken action on the following operating company ratings:

Bank of America, N.A.

Long-term deposit rating to A3 from A2, outlook stable; Short-term to P-2 from P-1

Barclays Bank plc

Long-term issuer rating to A2 from Aa3, outlook negative; Short-term P-1 affirmed

BNP Paribas

Long-term debt and deposit rating to A2 from Aa3; outlook stable; Short-term P-1 affirmed

Citibank, N.A.

Long-term deposit rating to A3 from A1, outlook stable; Short-term to P-2 from P-1

Credit Agricole S.A.

Long-term debt and deposit rating to A2 from Aa3, outlook negative; Short-term P-1 affirmed

Credit Suisse AG

Long-term deposit and senior debt rating to A1 from Aa1, outlook stable; Short-term P-1 affirmed

Deutsche Bank AG

Long-term deposit rating to A2 from Aa3, outlook stable; Short-term P-1 affirmed

Goldman Sachs Bank USA

Long-term deposit rating to A2 from Aa3, outlook stable; Short-term P-1 affirmed

HSBC Bank plc

Long-term deposit rating to Aa3 from Aa2, outlook negative; Short-term P-1 affirmed

JPMorgan Chase Bank, N.A.

Long-term deposit rating to Aa3 from Aa1, outlook stable; Short-term P-1 affirmed

Morgan Stanley Bank, N.A.

Long-term deposit rating to A3 from A1, outlook stable; Short-term to P-2 from P-1

Royal Bank of Canada

Long-term deposit rating to Aa3 from Aa1, outlook stable; Short-term P-1 affirmed

Royal Bank of Scotland plc

Long-term deposit rating to A3 from A2; outlook negative; Short-term to P-2 from P-1

Societe Generale

Long-term debt and deposit to A2 from A1; outlook stable; Short-term P-1 affirmed

UBS AG

Long-term debt and deposit to A2 from Aa3, outlook stable; Short-term P-1 confirmed.

Of UK-listed banks, HSBC (HSBA.L) and Barclays (BARC.L) were downgraded alongside RBS. The move had long been expected and UK bank shares have not responded drastically this morning, with Lloyds (LLOY.L) – which was downgraded in a separate announcement from Moody’s – slightly higher and others nursing small losses in a falling market.

‘The actions have been well flagged, so investors, and the banks themselves, should not have been caught off guard,’ commented financials analyst Michael Symonds of Daiwa Capital Markets.

RBS and other banks came out strongly against the move from Moody’s, which senior bankers around the world had vocally opposed. The 83% state-owned said in a statement to the market this morning: ‘The group disagrees with Moody's ratings change which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.’

US bank Citigroup meanwhile reportedly said it 'strongly disagrees' with Moody's decision.

But Lloyds chief executive António Horta-Osório put a positive spin on the news in a statement: ‘I am pleased that Moody's have recognised the substantial momentum we have made in de-risking our balance sheet and delivering on our strategy. I expect this momentum to be sustained as we continue to deliver on our promise of being the best bank for customers and shareholders.’

Symonds said the downgrades, which come at the end of a review started in February, meant at least one uncertainty had been removed for bank investors. ‘But the next round of downgrades may be just around the corner given the myriad challenges still weighing on the sector, including the far-from-resolved euro area crisis and imminent legislation on bail ins and resolution regimes.’

Consumer group Which? was spooked enough by the move to put out a statement reminding savers to protect their money: ‘People should spread their money across different banks and make sure their cash is in an account covered by the UK compensation scheme, which guarantees savings up to £85,000 per person, per financial institution,’ they said.

3 comments so far. Why not have your say?

Anthony Palmer

Jun 22, 2012 at 12:35

And for this, that Diamond bloke is paid 20 Million? there is something seriously wrong with the world. Greed greed and more greed.

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joe stalin

Jun 22, 2012 at 13:01

The rating agencies still have not been taken to task for their material role in the Financial crisis we are still trying to recover from. It was their fraudulent ratings that saw garbage sold world-wide as top investment grade or AAA. Their defence is that everybody should have done their own research. well we would should do thesame now and treat their lates utterings with contempt. Surely their cannot be anthing more than coincidence why US markets suddenly sold off in the pm? Somebody got a heads up maybe well that would be wrong would n't it. Nothing has changed the rating agencies are a cancer in the financial system they were in 08/09 they are still today.

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Christopher O'Kelly

Jun 22, 2012 at 19:00

If you look at the balance sheets of the major banks you will see that those which put more resources into market intelligence ie market research before making major investment decisions have suffered less from exposure to the current debacle than others such as RBS under Fred Goodwin & ABN and the Irish banks re: property development, etc,etc. A spread investment portfolio would be as sensible for a banker as to a fund manager dealing in equities, whether so called blue chip or other, as long as the decisions are well researched and balanced. What does low, medium or high risk strategy mean to a banker anyway?

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