The Big Three Are Downgrading Banks, But Are They In Bad Shape?

On August 7, Moody’s Investors Service (MCO) kickstarted a cascade of bank rating actions, downgrading 10 banks or bank holding companies (BHCs), placing six more under review and putting negative outlooks on another 11.

On August 15, Fitch Ratings, smallest of the Big Three NRSROs, told the market it wasn’t kidding when it lowered the U.S. banking industry’s operating environment score in late June and subsequently downgraded the U.S. long-term sovereign rating August 1. If rate hikes continued, Fitch cautioned that it might “be forced to” review over 70 banks and downgrade dozens. Shares in JPMorgan, Bank of America
BAC
and Citigroup
C
fell after the Fitch announcement. On August 21, one week later, S&P (SPGI) downgraded five mid-sized banks. Bank share prices dropped again.