Fitch Downgrades 8 Global Banks Including BNP, SocGen, BofA, Deutsche, And Morgan Stanley

Tyler Durden's picture

Every day after close it is one endless downgrade parade in which any of the permutations of rating agencies and either European sovereigns or banks get up and start playing musical chairs with each other. Then proceed to sit down for the overnight session. One of these days all the chairs will have been pulled. The banks cut in some capacity, either via long-term IDR or viability rating, are Bank of America, Barclays, BNP, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and Societe Generale. Now we know that even creditors do not want to trigger any ratings downgrade covenants because it would offset what is likely a terminal margin call, but at some point someone will need to do through the various bond docs and find out just who (ahem Bank of America) will need to post far far higher collateral as a result of all these relentless downgrades.

From Fitch

Fitch Ratings-New York-15 December 2011: Fitch Ratings has today taken rating actions on nine global trading and universal banks (GTUBs). The actions complete its assessment of the GTUBs, carried out in conjunction with a broad review of the ratings for the largest banking institutions in the world. Fitch has downgraded eight issuers' Viability Ratings (VRs) and affirmed one, removing them from Rating Watch Negative where they were placed on Oct. 13, 2011.
For a list of key rating actions refer to the end of this release. Full lists of rating actions affecting each bank are published today in separate comments on the affected banks.
The impact of VR downgrades on the banks' Issuer Default Ratings (IDRs) has depended to some extent on the level of their Support Rating Floors. IDRs are the higher of the VR and Support Rating Floor.
The VR downgrades reflected challenges faced by the sector as a whole, rather than negative developments in idiosyncratic fundamental creditworthiness.
However, Fitch differentiates among the peer group, in relation to its business mix, capitalisation, liquidity strength and market position.
The actions were motivated by Fitch's view that the GTUBs' business models are particularly sensitive to the increased challenges the financial markets face.
These challenges result from both economic developments as well as a myriad of regulatory changes. Fitch incorporated the significant progress it sees the banks have made in building up capital and liquidity buffers to resist market challenges, which has kept the VR downgrades to one or two notches.
Nonetheless, Fitch continues to be of the opinion that, however well-managed, the structural aspects of their funding, earnings, and leverage, predispose GTUBs to vulnerability to market sentiment and confidence, particularly during periods of exogenous financial stress. Furthermore, the complexity of their business models and exposure to fat tail risk make it more difficult to assess the size of loss that could emerge rapidly from unexpected events.
Over time market conditions are likely to ease, but Fitch expects market volatility to remain above historical averages and economic growth in developed markets to remain subdued for a prolonged period. This makes many business lines in securities operations more difficult, due to lower activity and higher funding costs.
While regulation enhances creditworthiness of banks generally by forcing them to hold higher capital and liquidity and curbing risk-taking in some areas, it also restricts earnings potential and increases costs, which encourages increasing the scale required to remain efficient and will likely reduce the number of market participants.
Reshaping business models to address the challenges they are currently facing will be an ongoing focus for GTUBs over the coming two years. It remains uncertain which of the GTUBs will emerge as the strongest once the new regulations are fully implemented and business appropriately adjusted, although Fitch views leading market positions across various products and geographies as a good indicator, especially if backed by substantial core capital.
Leading commercial banking or wealth management franchises are also an important consideration for Fitch's ratings of universal banks. For many of these banks, higher weighting of securities businesses on earnings and risk profiles is a negative factor in their ratings, and establishment of a more balanced business mix could be a positive ratings driver.
Fitch believes the GTUBs are much better placed to deal with difficult market conditions today than in 2008. Capitalization and liquidity are improved and vulnerabilities reduced. The rating actions taken were based on Fitch's assessment of creditworthiness against the relatively high rating levels that the GTUBs previously had.
The GTUBs have been improving liquidity, which has been a particular area of focus for the group. These banks ensure that they have significant liquid reserves in order to be able to meet obligations even if funding markets were to close for a significant period of several months. Although Fitch views such measures positively, the liquidity position would be less of a defense against any 'bank specific' concerns, should they arise, because a sound liquidity profile is expected of all the GTUBs.
Fitch notes that the exact specification of various metrics, along with any adjustments made, can influence the relative ranking of the various GTUBs. These metrics can also vary significantly over time, can be backward looking and make it more important to take a more balanced, forward view of creditworthiness.
Fitch's focus in evaluating the banks has been on those that have the best positions in diversified the product areas that are viewed as having the lowest risk.
The following highlights Fitch's ratings actions:
Bank of America Corporation
--Long-term IDR downgraded to 'A' from 'A+';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'bbb+' from 'a-'.
Barclays plc
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
BNP Paribas
--Long-term IDR downgraded to 'A+' from 'AA-';
--Short-term IDR affirmed at 'F1+';
--Viability Rating downgraded to 'a+' from 'aa-'.
Credit Suisse AG
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
Deutsche Bank AG
--Long-term IDR downgraded to 'A' from 'AA-';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'aa-'.
The Goldman Sachs Group, Inc.
--Long-term IDR downgraded to 'A' from 'A+';
--Short-term IDR downgraded to 'F1' from 'F1+';
--Viability Rating downgraded to 'a' from 'a+'.
Morgan Stanley
--Long-term IDR affirmed at 'A';
--Short-term IDR affirmed at 'F1';
--Viability Rating downgraded to 'a-' from 'a'.
Societe Generale
--Long-term IDR affirmed at 'A+';
--Short-term IDR affirmed at 'F1+';
--Viability Rating downgraded to 'a-' from 'a+'.
--Long-term IDR affirmed at 'A';
--Short-term IDR affirmed at 'F1';
--Viability Rating affirmed at 'a-'.
On Oct. 13, 2011 UBS AG's IDR was downgraded to 'A' from 'A+' due to a downgrade of its Support Rating Floor and its Viability Rating remained on Rating Watch Negative. Bank of America's VR was placed on Rating Watch Negative on Oct. 13, 2011.
The report 'Global Trading and Universal Bank Review: Resilience Increased but Challenges Remain' and the individual company rating action commentaries referenced above are available on '' and provide more specific details regarding each individual bank affected by today's actions.

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Strut's picture

BoA under $5 Bitchez!

ucsbcanuck's picture

As much as I would like to see that - don't hold your breath.

WonderDawg's picture

What about Citi? Fuck, they need downgrading, too. My puts are waiting...

Comay Mierda's picture

today is opposite day, as is everyday in this market for the last 4 months, so normally this would be pretty bad, but spx will probably rally on this

Fukushima Sam's picture

What about the JP Morgue?  I'm really disappointed they were not included!

CClarity's picture

Why no Spanish banks or Italian banks?  And where the hell is Commerzbank?

Strut's picture

S&P nailed 10 Spanish banks today. hasta la vista!

Hard1's picture

Bofa after hours rallying!!!! I jus't don't get how did the algos process this piece of news.

Strut's picture

PPT player... 



On top of the downgrade, Lehman (Talk about a zombie bank) just sued BoA over Archstone, somewhere in the neighborhood of 5B. I guess this is just chump-change nowadays??? Totally bullish.


I did it by Occident's picture

It's just SkyNet messing with our heads.  It makes perfect sense for BAC to go up when downgraded, right?  :)

dcb's picture

yup, almost always close oput shorts thursday. don't mind a rebuy at the close friday, I almost always buy close thorsday as well.

J 457's picture

All we need is one day Rodney.

Missed it by that much...


willien1derland's picture

Great post!...Your Avatar will require me to extend my pyschiatrist sessions for another 6 months! I feel empathy for the Corn Dog....

Abitdodgie's picture

You know I never noticed the corn dog untill you said something.

I did it by Occident's picture

LONG Pfizer (makers of Zoloft), bitchez!  and of course by LONG I mean a pun on the Corn dog.  :)

Wixard's picture

Not so sure. They won't risk a bank catastrophe. 

We have LOTS of ink. 


Go long green ink!


We see 5.50 before 4.50. 


I did it by Occident's picture

maybe 3.00, then 5.50 after the ink.  Then 0.00 after that at some point.

GeneMarchbanks's picture

'The banks cut are Bank of America, Barclays, BNP, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Societe Generale, UBS.'

3 US

2 French

2 Swiss

1 German

1 British = 9

SeverinSlade's picture

Bullish because it's only 1 German bank.  And Fitch could have slashed ratings much more.  BTFD!  [/sarc]

moonman's picture

It says 8 global. They must not consider one of these global


GeneMarchbanks's picture

Good point.

BAC ain't global...

jeff montanye's picture

i think the eight refers to downgrades.  ubs's ratings were kept the same (affirmed).

machineh's picture

How do the two French banks -- BNP Paribas and Societe Generale -- merit a rating one notch above the others?

Paging Reggie Middleton! 

TheEmperor's picture

8 is correct...UBS was not downgraded, but affirmed.


Raisuli's picture

I think that UBS was affirmed and not cut, so 8 out of 9 were cut as stated in the piece. No?

kito's picture

you must mean BOOM to the upside for stocks. ah and dow is up 60 just doesnt give a shit anymore. this isnt anything that the market isnt aware of............there is never a crisis till there is a crisis, and right now there isnt a crisis..............


Uncle Warren? React. 

Temporalist's picture

Warren is singing the Mr. Bubbles song with Erin...he's distracted at the moment.

Hippocratic Oaf's picture

Becky Quick is washing his taint

slaughterer's picture

No large effect whatsoever on AH and futures.  I think this actually might take the relief off financials for the moment.  

Scalaris's picture


All we need now is for Blackrock to come up with a statement saying that Greece has decided to embrace the Drachma afterall, and we are all set.

My money is on S&P for its next downgrade bonanza and I'm thinking sovereign downgrade instead of banks and maybe on Sunday, just to make for a giddy beginning of the week.

ziggy59's picture

Controlled financial demolition...

sabra1's picture

only controlled 'cause they waited 'till market close!

Temporalist's picture

Fitch: "Our arms are getting tired from this circle jerk."

sabra1's picture

mommy, is my piggybank safe with uncle corzine? WELL! DAMN IT MOTHER! IS IT SAFE OR NOT, BITCH?

Sudden Debt's picture

Mommy's doing "uncle" Corzine right now to get your money back dear, just a few more rides.


hedgeless_horseman's picture



...and find out just who (ahem Bank of America) will need to post far far higher collateral as a result of all these relentless downgrades.

There is that word, again!  Why can't the banks just rehypothecate some more collateral from that Gerald Celente guy? 

GeneMarchbanks's picture

You think they've been... uh... er... you know... commingling? No! I meant hyper-hypothecating?

hedgeless_horseman's picture



Read in the post where Fitch refers to it as,

"...reshaping business models to address the challenges..." 

We can call it re-hypo-co-collateral-mingling, or just agree to use the colloquialism, "clusterfucking."

willien1derland's picture

Fitch gets a SET baby - and to think the MIGHTY GOLDMAN SACHS GROUP's credit rating is almost identical to BoA is choice - Remember BoA 'purchased' Toxicwide Tanning Salons (aka Countrywide Financial) - Take that BlankenSTEIN...The light in the distance just might be the Villagers descending upon your Castle!

The Reich's picture

World Domino Dooms Day coming at the soonest!!

midgetrannyporn's picture

This is different. They usually wait until after the bankruptcy to downgrade.

Raskolnikoff's picture

It's so meaningless anymore, the few things remaining about capitalism and those left to grade and evaluate the system and give useful commentary are irrelevant, the government and the big boys behind them pulling the strings now are in charge and will decide what is kosher now and everyone else has no choice but to fall in line and like it. 

monopoly's picture

Getting very tired of all this. And we are just starting.