Moody’s Investors Service is delaying ratings downgrades on more than 100 banks as it assesses the effect of JPMorgan (JPM) Chase & Co.’s trading losses and a greater possibility of a euro breakup, a Moody’s official said.
The Moody’s official declined to be identified as he wasn’t authorized to comment publicly. Moody’s said on April 13 that it would begin downgrading banks, including BNP Paribas SA (BNP), France’s biggest lender, Germany’s Deutsche Bank AG (DBK) and New York-based JPMorgan and Morgan Stanley (MS), by early May.
Today, Moody’s spokeswoman Kirsten Knight said the firm’s schedule for “concluding bank rating reviews” hadn’t changed. “Moody’s expects to conclude the reviews by the end of June,” she said in an e-mailed statement. Moody’s declined to elaborate beyond the statement or comment on when the first downgrade would occur.
It’s the second time Moody’s has delayed publishing details of the downgrades in a month. Any ratings cuts could push up bank funding costs, heaping further misery on the industry as the boost that followed the European Central Bank’s cash injections in December and February wears off and policy makers struggle to extinguish the sovereign-debt crisis.
Moody’s is overhauling the way it rates European banks and firms with global securities operations to reflect the adverse effects of the sovereign-debt crisis, dwindling economic growth and the latest round of capital rules set by the Basel Committee on Banking Supervision.
JPMorgan announced last week it was facing losses of $2 billion related to derivatives trading, while Spain’s government nationalized Bankia SA (BKIA) and forced lenders to increase provisions against real estate loans by 30 billion euros. The 43-member Bloomberg Europe 500 (BEBANKS) Banks and Financial Services Index sank 3.3 percent today on concern Greece’s political quagmire makes a euro exit for the nation more likely.
“The combination of current challenges and inherent risk factors has introduced speculative elements into the obligations of these firms that we believe are not fully reflected in their current ratings,” Moody’s said in a note published Jan. 19.
After planning to start downgrading the industry in April, the ratings company issued its statement April 13 saying it was pushing back the timetable until early May. The review will start with Italian lenders, before moving on to countries including Spain, Austria, Sweden, Norway, the U.K. and Germany. Global capital-markets firms, including U.S. investment banks, were unlikely to have had their ratings changed until June.
UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s biggest lenders, Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA) and Morgan Stanley, owner of the world’s largest brokerage, are facing three-step downgrades on their long-term debt, Moody’s said. JPMorgan, the largest and most profitable U.S. bank, Goldman Sachs Group Inc. (GS), the fifth biggest in the U.S., and HSBC Holdings Plc (HSBA), the U.K.’s biggest, could be cut two levels.
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