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Fitch Downgrades: Financial Stock Outlook Weakens
12/20/2011 6:13:00 PM
(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Short data sourced from Yahoo! Finance.)
Fitch Ratings downgraded seven of the largest US and European banks on Thursday citing “increased challenges” in the financial markets.
Fitch cut long-term ratings on Barclays Plc and Credit Suisse AG by two notches to ‘A’ from ‘AA-’.
Bank of America Corp, BNP Paribas, Citigroup, Deutsche Bank AG and Goldman Sachs Group were all cut by one notch, or one third of a letter rating.
Fitch affirmed its long-term ‘A’ ratings on JPMorgan Chase & Co, Morgan Stanley and UBS AG, as well as its ‘A+’ rating on Societe Generale.
Fitch Ratings may only be the third-largest rating agency behind Standard & Poor and Moody’s, but the addition of their downgrades emphasizes others made at the end of last month. Some of those names had been clinging to their last AAA from Fitch.
Bank of America has been downgraded by all three agencies.
Fitch said the US and European banks “are particularly sensitive to the increased challenges the financial markets face.”
The downgrades “reflected challenges faced by the sector as a whole, rather than negative developments in idiosyncratic fundamental creditworthiness,” Fitch said. (via BBC)
In a separate announcement about the downgrade of Citigroup, Fitch cited “policy momentum” against using taxpayer money to support banks during a crisis.
So, we’re wondering, are there any financial stocks being targeted by bearish investors?
For ideas, we collected data on short seller trends, and identified a list of mega-cap financial stocks that have seen a sharp increase in shares shorted over the last month (i.e. an increase in bets that these stocks will decline).
This is significant, especially when you consider that short sellers tend to be more sophisticated investors (due to the fact that they require strict credit approval to perform these trades). So if these investors are turning bearish on a stock, it’s worth paying attention to.
Short sellers think these financial stocks are in trouble–do you agree?
Analyze These Ideas (Tools Will Open In A New Window)