File photoMoodys Investors Service lowered the credit ratings of 15 the worlds largest banks late Thursday, including Bank of America, JPMorgan Chase and Goldman Sachs, saying their long=term prospects for profitability and growth are shrinking.
Moody’s said the banks “have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities”.
Some of the largest European banks were also downgraded, including Barclays, Deutsche Bank and HSBC.
The downgrades mean Moodys is more concerned about the ability of the banks to repay their debts.
Moodys had said in February that it was considering downgrading the credit ratings of major banks in the US and in Europe.
A second group of banks may be able to raise capital themselves or might prefer to ask for bailout money.
Investors demand higher interest for riskier debt, which is what the downgrades represent.
Higher borrowing costs on the market could also lead banks to push up borrowing costs to customers.
The stock market has also priced in any negative impact from the ratings downgrades, according to Bert Ely, a banking consultant in the Washington, D.
In a sign that investors were taking the news in stride, stocks of major US banks rose in after hours electronic trading.
JPMorgan Chase rose 41 cents to $35.92 and Bank of America rose 12 cents to $7.94.
On Thursday the Dow Jones industrial average plunged 251 points, its second worst loss of the year, as new reports indicating slower manufacturing in the US and China made investors fearful that the global economy could be heading for another slump.
In June Moodys downgraded Spain by three notches, after downgrading 16 Spanish lenders in May.
Among the banks that were downgraded Thursday: Bank of Americas debt was downgraded to Baa2 from Baa1.
JPMorgan Chases debt was downgraded to A2 from Aa3 Citigroups to Baa2 from A3 Morgan Stanleys to Baa1 from A2 Goldman Sachss to A3 from A1 HSBCs to Aa3 from Aa2 Barclays to A3 from A1 Keywords: Moody’s Investors Service, credit ratings, major banks More In: Economy | Business.
Christiane Ruston is a business journalist based in Barcelona, Spain. Christiane has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Christiane spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.