(Adds RBC, Brynjolfsson, Gibbons, Fine comments)
June 21 (Reuters) – Ratings agency Moody’s downgraded many
of the world’s biggest banks Thursday. The credit reviews, which
began in February, reflect changing conditions, particularly in
Europe, that made its current ratings too high, analysts said.
STORY:
LIST OF DOWNGRADES:
BANK REACTIONS:
UBS:
“We are pleased that they have acknowledged that we have
made significant progress in adapting to changes in the
regulatory and capital markets environment and that UBS has a
strong capital position and capital targets well above its
peers, a healthy balance sheet, and limited exposure to the
sovereign debt of European countries rated AA and below. Our
liquidity position remains strong, and our funding position is
conservative, with sources that are diversified by market,
product and currency.”
RBC SPOKESWOMAN KATHERINE GAY:
“We remain one of the strongest and one of the highest rates
banks in the world across a number of categories. We don’t
expect any impact on our clients and minimal impact on our
business.”
MORGAN STANLEY:
“While Moody’s revised ratings are better than its initial
guidance of up to three notches, we believe the ratings still do
not fully reflect the key strategic actions we have taken in
recent years. However, their acknowledgment of our long-term
partnership with MUFG as well as our industry-leading capital
and liquidity highlight some of the transformative steps we have
taken. With our de-risked balance sheet, stable sources of
funding, diverse business mix and strong leadership team, we are
well positioned to deliver for clients and shareholders.”
CREDIT SUISSE SPOKESWOMAN VICTORIA HARMON:
“We are better rated than all but two banks.”
GOLDMAN SACHS SPOKESMAN DAVID WELLS:
“We believe our strong credit profile and unique mix of
attractive, high-return businesses with an institutional client
focus will continue to serve our shareholders, creditors and
clients well.”
CITIGROUP:
“Citi strongly disagrees with Moody’s analysis of the
banking industry and firmly believes its downgrade of Citi is
arbitrary and completely unwarranted. Moody’s approach is
backward-looking and fails to recognize Citi’s transformation
over the past several years, the strength and diversity of
Citi’s franchise, and the substantial improvements in Citi’s
risk management, capital levels and liquidity.”
ROYAL BANK OF SCOTLAND:
“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. Nonetheless, the
Group believes the impacts of this downgrade are manageable,
bearing in mind its GBP153 billion liquidity portfolio. The amount
of collateral that may have to be posted following this one
notch downgrade by Moody’s is estimated to be GBP9 billion as of
31 May 2012. The Group continues to maintain a solid liquidity
and funding position. RBS has completed its planned wholesale
funding requirements for 2012.”
BNP PARIBAS:
“This rating action was anticipated as Moody’s placed BNP
Paribas on review for possible downgrade of up to two notches on
15 February 2012. This is part of a wider action where Moody’s
placed a number of European banks and institutions with global
market activities on review for possible downgrade.”
“BNP Paribas notes that Moody’s recognises the strength of
its universal bank model and very strong retail and commercial
franchises across a variety of product lines and geographies.
Nevertheless, BNP Paribas thinks that the following important
elements have not been sufficiently taken into consideration by
Moody’s:”
– “BNP Paribas’ deleveraging plan, which is now almost
completed, and will allow it to be one of the very few banks
with a fully loaded Basel 3 CET1 ratio of 9% at end-2012.”
– “Its strong liquidity profile, with 201bn liquid asset
reserve immediately available as at 31 March 2012, amounting to
roughly 100% of its short-term wholesale funding, and 51bn
excess of stable resources against customer funding needs.”
“BNP Paribas’ very good resilience through the crisis,
strong solvency, and consistently cautious risk policy make it
one of the most solid banks in the world.”
“BNP Paribas is rated AA- by S&P; and A+ by Fitch, making it
one of the best rated banks according to those well respected
rating agencies.”
INVESTORS AND ANALYSTS:
MARK GRANT, MANAGING DIRECTOR AT SOUTHWEST SECURITIES INC:
“The biggest surprise is the three-notch downgrade of Credit
Suisse, which no one was looking for. In fact, it was Morgan
Stanley that was supposed to be downgraded by that amount and
Morgan received only two notches of cuts.”
“Overall, the cost of funding for banks is going to be
higher. It will be more difficult to execute complex trades and
you will see counterparty risk allocations curbed. I wouldn’t by
any bank stocks – or any stocks, for that matter, here. I would
buy senior debt of banks because spreads are very wide and that
represents good opportunity so long as you stay ‘senior’ in the
capital structure.”
BILL SMEAD, CIO AT SMEAD CAPITAL MANAGEMENT:
“We spend all of our time closing barn doors. The animals
are already out of the barn.”
JOHN BRYNJOLFSSON, MANAGING DIR. OF HEDGE FUND ARMORED WOLF:
“We don’t consider this alarming news at all. We are in the
midst of a global bank delevering, capital building effort of
global financial institutions. With zero percent money rates in
the U.S., lowering rates globally, liquidity pumping globally,
and capital outside of banks, on sidelines, the question is
‘When will it be safe to go back in the water?’ Investors have
been burned by false starts, and quick trigger fingers too
often.”
SUSANNA GIBBONS, VICE PRESIDENT, PORTFOLIO MANAGER FOR FIXED
INCOME, RBC GLOBAL ASSET MANAGEMENT:
“At first glance it looks a little better than people’s
worst fears, so that’s a positive. Morgan Stanley, I think, was
the big question. We were worried about a three-notch downgrade
and they were downgraded two notches. It looks like nobody was
taken down more than expected so that’s good. It was fine and
certainly within expectations. It puts some of the worst fears
to bed. Now that this is behind us and it’s not the worst
expected I’d say that’s a positive for the market.”
ERIC FINE, PORTFOLIO MANAGER AT VAN ECK GLOBAL:
“One of the most anticipated events in the latest market
cycle and I think the two notches on Morgan Stanley is less bad
than the worst case which was being increasingly discounted.
Because this was so anticipated and now effectively over, if
there were no broader issues this would most likely be a relief
moment. However the so far unresolved European crisis and more
broadly the lack of a serious long-term fiscal policy fix in the
U.S. will both remain weights on the market.”
(Editing By Alwyn Scott)
