Standard & Poor's Ratings Services (S&P) has taken
various actions on the outlooks of systematically important U.S.
banks. The particular 8 banks include
JPMorgan Chase & Co.
Bank of America Corporation
The Goldman Sachs Group, Inc.
The Bank of New York Mellon Corporation
State Street Corporation
Wells Fargo & Company
BANK OF AMER CP (BAC): Free Stock Analysis
BANK OF NY MELL (BK): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
STATE ST CORP (STT): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.
S&P is reassessing the insertion of sovereign support while
providing ratings to the aforementioned bank holding companies.
Notably, the rating agency downgraded the outlook on
non-operating holding company (NOHC) of JPMorgan to 'Negative'
from 'Stable'. However, its outlook for the other 7 NOHCs has
been reiterated at 'Negative'.
The outlooks reflect the possibility of S&P not incorporating
unusual sovereign support in the ratings of NOHCs, given the
continuous changes in the regulatory perception of providing
support. Additionally, this was the primary reason for a change
in the outlook for NOHC of JPMorgan.
Additionally, S&P reaffirmed the outlook on JPMorgan's
operating subsidiaries at 'Stable'. Further, the outlook for
operating companies of BNY Mellon, State Street and Wells Fargo
have been revised from 'Negative' to 'Stable', driven by the
ratings upgrade of long-term sovereign credit rating on the U.S.
to 'Stable'. S&P believes that in case of any future
financial crisis, government support will continue for the core
and important operating subsidiaries of systematically important
However, S&P maintained the outlook for the operating
subsidiaries of BofA, Citigroup, Goldman and Morgan Stanley at
'Negative'. This was based on company-specific factors.
Further, S&P affirmed its Issuer Credit Ratings (ICRs) on all
8 banks. However, the rating agency will likely lower the ratings
on these banks if there is a greater chance of regulators not
providing sovereign support in case of bankruptcy. Notably, in
the case of a contagious fall-out, there is a higher chance of
The news of the rating and outlook affirmation by S&P offers
relief to the banks. For banks already facing higher funding
costs and operating expenses, this reiteration will be a
Further, this will boost investors' confidence in the overall
financial sector. In May 2013, Fitch Ratings had reiterated the
long and short-term Issuer Default Rating (IDR) of 12 Global
Trading and Universal Banks.
The ratings might also help financial institutions to tackle
better another economic crisis. Notably, this could ultimately
result in less involvement of taxpayers' money in the bailout of
troubled financial institutions.