Moody’s Investors Prepared To Cut Ratings On Morgan Stanley
Although many have put behind the distress of past years, Moody’s Investors is determined not to leave things go wild again. That’s why the rating agency slashes at players in the market without scrutiny trying to be one step ahead of potential turmoil. The watchdog recently announced it had Morgan Stanley, UBS AG and Credit Suisse on review for a potential rating cut.
The ratings agency explained in a statement that present day challenges are risky for long term ratings and credit assessments of 17 global and 114 European financial institutions, among which Morgan Stanley, UBS and Credit Suisse. Joining these financial institutions are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings and Goldman Sachs.
The statement reads: “Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions”.
Moody’s added that the present day context and challenges of the financial market along with “inherent vulnerabilities such as confidence – sensitivity, interconnectedness and opacity of risk, have diminished the longer term profitability and growth prospects of these firms”.
Although Moody’s announcement left markets unimpressed the fact remains that banks worldwide continue to be under scrutiny. First they are announced of a review regarding potential rating cuts and then from “indicative guidance” things evolve to actual reductions.
Moody’s review looks at a two level rating cut for Goldman Sachs Group, Deutsche Bank, JP Morgan Chase and Citigroup. UBS AG, Credit Suisse Group and Morgan Stanley have been warned of a potential three levels rating cut.
Even though Morgan Stanley’s spokesmen declined to release any comment regarding the review, UBS said that Moody’s announcement “does not immediately affect UBS’s ratings”. In addition, the company mentioned that its “financial position is strong and a source of competitive advantage”.
Jim Antos , analyst at Mizuho Securities Co., stated for Bloomberg that over “the next two years, these big banks will be less robust than they used to be, that’s for sure. For any bank that has to raise capital today, it’s already very difficult”. In the end “this makes it just that much more expensive and difficult”.