iam802 wrote:Short GS
iam802 wrote:Short GS
--Moody's sees investment banking profitability diminished longer term
--Says "unexpected losses...can overwhelm the resources" of even large banks
--"Some of these risks have been partly mitigated...but they have not been eliminated," Moody's says
--Citi: Bank "has made significant progress" in restoring capital and liquidity
(Updates throughout, including with statement from Citi in 11th paragraph.)
By Drew FitzGerald and Matthias Rieker
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--In the latest setback for investment banking, Moody's Investors Service placed the ratings of Bank of America Corp. (BAC), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS) and three other global financial institutions on review for possible downgrade because it says the business' profitability will be diminished longer term.
Moody's also said Wednesday it is reviewing J.P. Morgan Chase & Co. (JPM), Morgan Stanley (MS) and Royal Bank of Canada (RY, RY.T) for possible downgrade. Seven other financial firms' reviews were extended Wednesday as part of a separate ratings action on European banks, while four more had other negative reviews extended.
Revenue and profits from capital markets businesses, made up of securities trading and underwriting and financial advice to corporations about mergers and acquisitions, make up a big part of the overall earnings at Bank of America, Citi and J.P. Morgan, and are essentially the entire business of Goldman Sachs and Morgan Stanley.
The ratings firm cites new economic and regulatory challenges that could dim the banks' future growth prospects. Capital markets firms are confronting "more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions," along with "inherent vulnerabilities" and "opacity of risk," the ratings firm said.
Moody's last year adjusted the ratings of big banks because it no longer believes banks would get the same help from governments that they did during the 2008 financial crisis if they got into trouble again.
Regulators, meanwhile, have curbed the investment banking business somewhat, particularly proprietary trading--a business where banks trade on their own account rather than for their customers. Also, investor concerns about the European debt crisis have damaged world-wide capital markets and dented profits from securities trading and underwriting in the second half of last year.
Moody's said it at first expected the banks' standalone credit profiles to recover after the acute phase of the 2008 financial crisis had passed, but it now sees those challenges as ongoing structural problems for global investment banks.
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Muhajir wrote:"Goldman Sachs Rules the World"??? whatever happened to that?
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