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Portfolio > Economy & Markets

Fitch Downgrades 3 Big Banks, Threatens Over a Dozen More

By Marlene Y. Satter

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Fitch Ratings cut the long-term issuer default ratings of three major banks late Thursday, and warned that more than a dozen more may see their ratings cut as well as it put them on a negative watch.

Bloomberg reported that UBS, Royal Bank of Scotland Group and Lloyds Banking Group were all downgraded. UBS lost a single notch on its long-term issuer default rating and its “support rating floor,” going from A+ to A, with Fitch saying in a statement that its “view that the one-notch uplift for close affiliation with the Swiss state is no longer warranted.”

RBS and Lloyds both saw their ratings dropped by two notches, from Double A- to A. In its case, Fitch cited the lessening likelihood that the U.K. would provide the bank support. Moody’s Investors Service had taken a similar action against a dozen banks on Oct. 7, as previously reported by AdvisorOne, also citing lessening likelihood of government support for banks.

In addition, the viability ratings and some credit grades of seven global banks were placed on negative watch because of new regulatory and economic developments; among them were Goldman Sachs Group and Morgan Stanley. European banks like Credit Agricole, Deutsche Bank, Credit Suisse, BNP Paribas, Société Generale and Barclays were put under the microscope because of sovereign debt worries, and Bank of America Corp. was warned over the possibility of mortgage litigation.

In a statement, Fitch analysts said of the action that it “reflects Fitch’s view that these institutions’ business models are particularly sensitive to the increased challenges the financial markets are facing. These challenges result from both economic developments, particularly in the euro area, as well as a myriad of regulatory changes.”

Banks weren’t the only entities to hear bad news. Spain’s credit rating was downgraded by Standard & Poor’s for the third time in three years, with its long-term sovereign debt falling from Double A to Double A- over increasing default worries in the eurozone.

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