Bank Stocks Rally Despite Ratings Cut -- Morgan Stanley Drops Two Notches Instead of Three
June 26, 2012 08:20 ET
Bank Stocks Rally Despite Ratings Cut -- Morgan Stanley Drops Two Notches Instead of Three
Five Star Equities Provides Stock Research on Bank of America and Morgan Stanley
NEW YORK, NY--(Marketwire - Jun 26, 2012) - U.S. bank stocks posted solid gains last Friday, despite Moody's Investor's Service cutting the credit ratings of 15 banks globally. "It's been like a cloud over the sector," said Brian Gendreau, market strategist at Cetera Financial. "And look at who's going up: bank stocks. There are obviously some people who thought it would be much worse." Five Star Equities examines the outlook for companies in the Banking Industry and provides equity research on Bank of America Corp (
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Of the six largest U.S. banks, only Wells Fargo maintained its credit rating. The revenues of the 5 major U.S. banks that received cuts -- JPMorgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley -- decreased 11 percent from the year prior. The rating cuts by Moody's were the first since the financial crisis. Morgan Stanley emerged as "the clear winner" according to analysts at investment bank Keefe Bruyette & Woods. Many analysts were expecting Morgan Stanley's rating to be cut by three notches instead of the two it received.
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Shares of Bank of America rose 1.53 percent on Friday. The bank also announced the redemption of $3.9 billion of trust preferred securities on July 25, 2012. "This action reflects the work we've done to build record levels of capital and liquidity," said Chief Financial Officer Bruce Thompson. "We continue to look to optimize the balance sheet."
"Morgan Stanley was probably the most at risk of a three-notch downgrade, which would have put them right on the verge of below-investment grade," Thomas Chow, money manager at Delaware Investments, said in a telephone interview. "The surprise was that they came in a little better than initially guided by the agency, so that probably helped calm some fears."
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