Rating agencies getting busy …
Fitch and Moody’s had negative comments last week … now S&P puts Oil into the fire …
Be aware … tomorrow they will hold a conference call about the following press release …
I don’t think, we will see anything positive …
NEW YORK (Standard & Poor’s) June 2, 2008–At the conclusion of its review of global universal and investment banks, Standard & Poor’s Ratings Services lowered its ratings on Lehman Brothers Inc., Merrill Lynch & Co. Inc., and Morgan Stanley. Standard & Poor’s also revised its outlooks on Bank of America Corp. and JPMorgan Chase & Co. to negative. In addition, Standard & Poor’s affirmed its ratings on Citigroup Inc., removed the ratings from CreditWatch negative, and assigned a negative outlook. We also placed the ratings on Wachovia Corp. on CreditWatch negative. The outlooks on the large financial institutions sector in the U.S. are now predominantly negative.
“The negative actions reflect prospects of continued weakness in the investment banking business and the potential for more write-offs, though not of the magnitude of those of the past few quarters,” explained Standard & Poor’s credit analyst Tanya Azarchs. “They also reflect a reassessment of the vulnerabilities of the wholesale and less diversified model of funding for the specialized investment banks.” (See “S&P Completes Review Of Global Securities Industry; Ratings Lowered On Morgan Stanley, Merrill Lynch & Co. Inc., And Lehman Brothers Holdings Inc.; Outlooks Negative,” published June 2, 2008, on RatingsDirect, the real-time, Web-based source for Standard & Poor’s credit ratings, research, and risk analysis.) For the universal banks, the outlook revisions reflect our expectation of further sharp deterioration in U.S.
residential mortgage loan portfolios and residential construction. We believe loss rates in those loan sectors are poised to exceed historical levels by a wide margin. This could depress earnings to a greater extent than is discounted in our current ratings (see “Rated U.S. Banks Likely To Weather Market Difficulties,” published May 6 2008, on RatingsDirect). If these firms were to suffer bottom-line losses or prolonged periods of low and volatile earnings, we could lower the ratings. Alternatively, if the effect is relatively less severe, the ratings could remain at current levels.
The extraordinary capital raises by the industry have been most welcome and have mitigated the severity of downgrades. However, the quality of capital has suffered in that much of the capital was in the form of hybrid securities. In many cases, the resulting amount of hybrids in the capital structure now exceeds Standard & Poor’s limits on such instruments (see “Hybrid Capital Handbook,” published May 12, 2008, on RatingsDirect).
Standard & Poor’s will hold a telephone conference call on Tuesday, June 3, at 10:30 a.m. EDT to discuss these actions and related issues. The live call-in numbers for this call are (1) 210-795-1098 (U.S./all others) and (44)
20-7108-6248 (U.K.); the Conference ID for this call is 2029583, and the passcode is SANDP. A replay of this call will be available starting about an hour after the call concludes through Tuesday, June 10th; the replay number will be (1) 203-369-1201.
Summary Of Today’s Rating Actions
To From
Ratings lowered
Lehman Brothers Holdings Inc.
Counterparty credit rating A/Negative/A-1 A+/Negative/A-1
Merrill Lynch & Co.
Counterparty credit rating A/Negative/A-1 A+/Negative/A-1
Morgan Stanley
Counterparty credit rating A+/Negative/A-1 AA-/Negative/A-1+
Outlook revised to negative; rating affirmed
Citigroup Inc.
Counterparty credit rating AA-/Negative/A-1+ AA-/Watch Neg/A-1+
Bank of America Corp.
Counterparty credit rating AA/Negative/A-1+ AA/Stable/A-1+
JPMorganChase & Co.
Counterparty credit rating AA-/Negative/A-1+ AA-/Stable/A-1+
Ratings placed on CreditWatch negative
Wachovia Corp.
Counterparty credit rating AA-/Watch Neg/A-1+ AA-/Negative/A-1+
Ratings affirmed
Credit Suisse
Counterparty credit rating A+/Negative/A-1
Deutsche Bank AG
Counterparty credit rating AA/Negative/A-1+
Goldman Sachs Group Inc.
Counterparty credit rating AA-/Negative/A-1+
UBS AG
Counterparty credit rating AA-/Negative/A-1+
U.S. Bancorp
Counterparty credit rating AA/Stable A-1+
Wells Fargo & Co.
Counterparty credit rating AA+/Stable/A-1+
I don’t buy, that this is the last downgrade …
BUT …
on a different, but related field … the “dark powers” already work on a “work around” … as always 
The insurance companies want to “overrule” ratings … READ BELOW!!!
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Tags: bond insurers, downgrades, financials, Insurance, rating agencies, S&P
