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Credit Suisse cut three levels as Moody’s downgrades banks

By Dakin Campbell and Michael J. Moore, Bloomberg

June 22, 2012 • Reprints

June 22 (Bloomberg) -- Credit Suisse Group AG’s credit rating was cut three levels and Morgan Stanley’s was reduced by two as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms.

Credit Suisse was cut to A2, the same as JPMorgan Chase & Co. and BNP Paribas SA, as Moody’s completed a review of global banks with capital-markets operations it announced in February. Morgan Stanley and Zurich-based UBS AG, the other firms singled out for three-level reductions, were lowered two steps instead, the ratings firm said yesterday in a statement.

“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in the statement.

Lower ratings can lead to higher costs for borrowing and collateral. The downgrades leave Citigroup Inc. and Charlotte, North Carolina-based Bank of America Corp. as the lowest-rated banks among the 15 at Baa2, two levels above junk. Moody’s kept the long-term ratings of both lenders on negative outlook, which means they may be cut again.

Asian stocks fell, trimming a third weekly advance, after the Moody’s downgrades and reports signaling a slowing U.S. economic recovery. The MSCI Asia Pacific Index slid 1.1 percent as of 11:28 a.m. in Tokyo. Oil traded near a nine-month low.

JPMorgan’s Trading

JPMorgan, which reported a $2 billion trading loss last month, was included by Moody’s in the group of banks with the highest stand-alone credit ratings, along with HSBC Holdings Plc and Toronto-based Royal Bank of Canada. Moody’s said those firms had stronger “shock absorbers” from earnings in more stable businesses than investment banking and trading.

The trading loss at New York-based JPMorgan was an “important factor in the downgrade of the stand-alone credit profile,” Moody’s said. “It illustrates the challenges of monitoring and managing risk in a complex global organization and highlights the opacity of such risks.”

Royal Bank of Scotland Group Plc, based in Edinburgh, and Paris-based Societe Generale SA, were both cut one grade and Frankfurt-based Deutsche Bank AG and French lenders BNP Paribas and Credit Agricole SA were all lowered two levels.

Goldman Sachs Group Inc., Morgan Stanley and London-based Barclays Plc all had their holding company short-term ratings cut to P-2 from P-1.

Credit Suisse’s main operating subsidiary, Credit Suisse AG, also was cut three levels to A1 from Aa1 and the outlook is stable, Moody’s said.

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Related Terms
bank 6455Bloomberg 5254financials 2975stocks 2123equities 1689Morgan Stanley 934JPMorgan Chase & Co. 818Citigroup Inc. 603Bank of America Corp. 596Barclays Plc 573Bank of Canada 490UBS AG 455Deutsche Bank AG 426investment bank 415Credit Suisse Group AG 308HSBC Holdings Plc 298banks 275North Carolina 251BNP Paribas SA 224Societe Generale SA 224Royal Bank of Scotland Group Plc 206Goldman Sachs 198investment banking 198JPMorgan 176New Mexico 139Nomura Holdings Inc. 103Royal Bank of Canada 87Morgan Stanley 77UBS 77Macquarie Group Ltd. 77Citigroup 73Bank of America 70Credit Agricole SA 41peer 29Credit Suisse 28Credit Suisse AG 23Moody's 18James Gorman 18Portales Partners LLC 16Charles Peabody 16KBW Inc. 11Downgrade 10BNP Paribas 8Mitsubishi UFJ Financial Group Inc. 7Santa Fe 6David Mathers 5bank subsidiary 4David Viniar 4bank ratings 3Amit Goel 3Moody 3Kinner Lakhani 3Greg Bauer 3David Konrad 3Goldman Sachs Group Inc . 2lowest-rated banks 2Tom Naratil 2David Knutson 2Thornburg Management Inc. 1Citibank NA 1internal bank policies 1main operating subsidiary 1rated banks 1George Strickland 1

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