[cobran20]

First the ratings agencies were late to downgrade, now there is no stopping them! I wonder what the new criteria is supposed to be?

link

Quote

NEW YORK (CNNMoney) -- Standard and Poor's downgraded the credit ratings of dozens of banks Tuesday, after applying new criteria to the world's 37 largest financial institutions.

Among those to suffer a ratings cut: Bank of America, Citigroup, Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), Wells Fargo and JPMorgan Chase (JPM, Fortune 500).

1216PrintComment
Ratings of Bank of America (BAC, Fortune 500), Citigroup, Goldman Sachs and Morgan Stanley dropped one notch to A- from A. S&P maintained a "negative" outlook on those companies.

Wells Fargo (WFC, Fortune 500) was cut one level to A+ from AA-, and also has a "negative" outlook.

JPMorgan Chase's rating was revised a step lower to A from A+, but the bank still boasts a "stable" outlook.

Bank of America stock slides to new low
Shares of the major banks were lower in after-hours trading. Bank of America's stock edged down 0.8%, after closing during regular trading at $5.08 cents, its lowest level since March 2009.

Banks outside of the United States also suffered ratings downgrades, including London-based Barclays (BCS) and HSBC (HSBC) and Swiss bank UBS (UBS).

S&P's new ratings methodology, announced earlier this month, evaluates banks' creditworthiness based on economic and industry risks, bank-specific strengths and weaknesses, as well as "likelihood of external government or group support."

Financial institutions have had a tough year, with a choppy economic recovery, volatile markets, and concern about what exposure they may have to the European debt crisis.

"U.S. banks are healthier than most Americans are willing to give them credit for, but the banking is a business of confidence, and downgrades across the board like this are just another strike against them," said Jack Ablin, chief investment officer at Harris Private Bank.

[Chimerica]

All top tier, blue chip institutions there, ......... scary.

[cobran20]

Chimerica, on 30 November 2011 - 03:17 AM, said:

All top tier, blue chip institutions there, ......... scary.

Are Australian banks still AAA?

[Ruffian]

Chimerica, on 30 November 2011 - 03:17 AM, said:

All top tier, blue chip institutions there, ......... scary.

+1

Not very happy about that at all. The GFC was just a trial run... this one is going to be the real thing.

[zaph]

cobran20, on 30 November 2011 - 05:29 AM, said:

Are Australian banks still AAA?

downgraded:
rabobank
hsbc au
ING
JP morgan au

not all were AAA to start with. i may have missed a few.

http://www.zerohedge...s-fargo-morgan-

This post has been edited by zaph: 30 November 2011 - 05:50 AM

[Solomon]

Chimerica, on 30 November 2011 - 03:17 AM, said:

All top tier, blue chip institutions there, ......... scary.

I'm with you, Chime. Heady stuff.
Do ratings agencies have access to intimate data from the banks, or do they rely on external sources?

[Chimerica]

Solomon, on 30 November 2011 - 12:32 PM, said:

I'm with you, Chime. Heady stuff.
Do ratings agencies have access to intimate data from the banks, or do they rely on external sources?

Good question, I have no idea. I'd like to think that they have some kind of exclusive insight or data from the banks but I very much doubt it, smoke, mirrors and creative accounting is always at play.

[cobran20]

Solomon, on 30 November 2011 - 12:32 PM, said:

Do ratings agencies have access to intimate data from the banks, or do they rely on external sources?

Large managed funds send their own team of analysts to review the books of companies before they invest money in them. Companies seem to accept this since it impacts the share price. I'd suspect that ratings agencies can do the same with banks.

[fed up]

Ratings agencies are provided with information by the company and they also look at industry information that is publicly available.

[cobran20]

fed up, on 05 December 2011 - 12:22 PM, said:

Ratings agencies are provided with information by the company and they also look at industry information that is publicly available.

In other words, they can be readily misled!

[Solomon]

fed up, on 05 December 2011 - 12:22 PM, said:

Ratings agencies are provided with information by the company and they also look at industry information that is publicly available.

Is this like the ATO when we do our own tax returns?
How much do we individually manipulate (within the law) that information?
Hmmm.
If that's the case, ratings agencies, may only be seeing the tip of the iceberg.
They are only looking in through the window, and think they see everything in the room.

[cobran20]

Solomon, on 05 December 2011 - 11:00 PM, said:

Is this like the ATO when we do our own tax returns?
How much do we individually manipulate (within the law) that information?
Hmmm.
If that's the case, ratings agencies, may only be seeing the tip of the iceberg.
They are only looking in through the window, and think they see everything in the room.

A thorough fund manager would not only demand their own audit of a company they plan to invest in, but also talk to the company's main suppliers and clients to get a further assessment of the trading outlook.

To make an assessment based purely on what a company provides to the public will not necessarily lead to the best ratings decision. This is the underlying problem with investing purely based on fundamentals - lack of quality data.