Moody's Reviewing Ratings on BofA (BAC), Citigroup (C) and Wells Fargo (WFC) for Downgrades
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Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 2.8%
EPS Growth %: -11.7%
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Moody's sent shock-waves through the banking sector Thursday morning after placing the credit ratings of three of the largest U.S. banks on review for possible downgrades, citing the removal of government support.
The rating agency placed the deposit, senior debt, and senior subordinated debt ratings of Bank of America (NYSE: BAC), Citigroup Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC) and their subsidiaries on review for possible downgrade.
In the agency's review of the ratings, Moody's said it will focus on whether the ratings should be adjusted to remove the unusual "uplift" which has been seen from systemic support assumptions that were increased during the financial crisis and include only pre-crisis levels of government support.
Moody's also said it will assess improvements in Bank of America's and Citigroup's standalone financial strength.
The rating agency continues to assess the impact of the Dodd-Frank Act.
"The US government's intent under Dodd-Frank is very clear," says Senior Vice President Sean Jones. "Going forward, it does not want to bail out even large, systemically important banking groups." Mr. Jones notes however that Moody's continues to believe that such a group could not be resolved without risking a disorderly disruption of the marketplace and the broader economy. "Even so, the support assumptions built into these three banks' ratings are unusually high, which may no longer be appropriate in the evolving post-crisis environment," added Jones.
The rating agency placed the deposit, senior debt, and senior subordinated debt ratings of Bank of America (NYSE: BAC), Citigroup Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC) and their subsidiaries on review for possible downgrade.
In the agency's review of the ratings, Moody's said it will focus on whether the ratings should be adjusted to remove the unusual "uplift" which has been seen from systemic support assumptions that were increased during the financial crisis and include only pre-crisis levels of government support.
Moody's also said it will assess improvements in Bank of America's and Citigroup's standalone financial strength.
The rating agency continues to assess the impact of the Dodd-Frank Act.
"The US government's intent under Dodd-Frank is very clear," says Senior Vice President Sean Jones. "Going forward, it does not want to bail out even large, systemically important banking groups." Mr. Jones notes however that Moody's continues to believe that such a group could not be resolved without risking a disorderly disruption of the marketplace and the broader economy. "Even so, the support assumptions built into these three banks' ratings are unusually high, which may no longer be appropriate in the evolving post-crisis environment," added Jones.
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