Moody's downgrades 15 banks, 5 in U.S.

June 21, 2012 at 7:31 PM
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NEW YORK, June 21 (UPI) -- Moody's Investors Service Inc. Thursday lowered ratings on 15 banks, including five U.S. banks whose share prices had begun to recover after trading.

Shares in the banks took a major dive on Wall Street Thursday, as investors priced in the anticipated downgrades -- and then began to rise in after-hours trading, Forbes reported.

Morgan Stanley gained 3 percent after the close, following a two-notch downgrade, Forbes said. Goldman Sachs, Bank of America, Citigroup and JPMorgan Chase also posted gains in trading after the close.

Moody's said HSBC, Royal Bank of Canada and JPMorgan face difficult risks associated with their capital markets businesses but also "have stronger buffers, or 'shock absorbers,'" than many similarly situated banks, largely due to better risk management and greater diversity in their revenue streams, Forbes said.

"Capital and structural liquidity are sound for this group, and their direct exposure to stressed European sovereigns and financial institutions is contained," Moody's concluded.

Barclays, BNP Paribas and Credit Agricole have "relatively robust shock absorbers," and Goldman Sachs has a "record of effective risk management," Moody's said. However, European banks included in Thursday's downgrade are subject to "sizeable but varying degrees of exposure to weaker European economies."

Moody's said Royal Bank of Scotland, Morgan Stanley, Citigroup and Bank of America have "thinner or less reliable" buffers, as well as histories of higher volatility and problems with risk management. RBS especially is subject to "noteworthy exposure to the euro area debt crisis," Moody's said.

The announcement of the downgrades came after economic data showed declines in manufacturing and in U.S. sales of existing homes.

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