Fitch Downgrades Major Banks
Fitch Ratings cut the credit grades of Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), and Citigroup (NYSE:C) on Thursday as the impact of financial regulation and continued market turmoil resulting from Europe’s debt crisis weighed on the industry and stocks.
Each lender had its long-term issuer default rating cut one level, from A+ to A. Barclays (NYSE:BCS), Credit Suisse (NYSE:CS), Deutsche Bank (NYSE:DB), and BNP Paribas also had their grades lowered yesterday.
Fitch’s statement yesterday follows a similar move by Moody’s Investors Service in September, when the firm cut bank ratings citing a lower probability that the U.S. would support the industry in an emergency, as well as cuts by Standard & Poor’s last month.
The credit ratings of the world’s largest financial firms have come under pressure as economic growth stagnates and concern over Europe’s ability to effectively quash its debt crisis mounts. European lenders must raise about 114.7 billion euros in capital to help address the turmoil and meet new requirements, the European Banking Authority said last week.
Fitch downgraded Barclays and Credit Suisse to A from AA-, and lowered BNP Paribas and Deutsche Bank to A+ from AA-. Fitch also corrected an earlier version of its statement to announce that Deutsche Bank was cut one level instead of two, while reaffirming Morgan Stanley’s (NYSE:MS) long-term issuer default rating of A.
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