Salient to Investors:
Downgrades of 15 global banks by Moody’s Investors Service were met instead by rallies in stocks and bonds.
Gerard Cassidy at RBC Capital Markets said American banks are stronger than three years ago, and market prices have long reflected concerns raised by Moody’s.
Moody’s announced on Feb. 15 that it was reviewing the 17 banks, so by the time the results came out, the worst-case scenario for downgrades was already priced in. George Strickland at Thornburg Investment Management sees Morgan Stanley bonds rallying.
Richard Bove at Rochdale Securities said that to downgrade a BofA or Citigroup or companies sitting on hundreds of billions of dollars of cash in government-backed securities makes no sense – you can forget Moody’s.
Ken Fisher at Fisher Investments said Moody’s won’t detect a problem in advance and move a rating to warn the public – Moody’s effectively validates what the market’s already done.
David Hendler at CreditSights said large U.S. banks had ratings of Baa1 (BBB) or lower in the 1980s and early 1990s following Latin America’s sovereign-debt defaults of the 1980s – the industry has been through a triple-B phase before, and will come back from it again.
James Leonard at Morningstar sees the Moody’s cuts a mea culpa from 2007 and 2008, saying the banks have improved so much in the last few years in terms of capital while their ratings keep going down, indicating the ratings were so wrong before.