CHARLOTTE – Bank of America, which is headquartered in North Carolina, was downgraded by Moody’s Investment Service this week as the ratings firm downgraded the scores on fifteen banks and financial institutions overall.
The Bank of America Corporation’s long-term senior unsecured debt to was downgraded to Baa2 from Baa1 with an outlook of “negative.”
The bank’s operating company, Bank of America N.A., was also downgraded. The firm’s long-term deposit rating was marked down to A3 from A2, and the short term score went from P-1 to P-2. However, Moody’s did rate the BOA N.A. company as having an “outlook” that is “stable.”
While the downgrading of some banks such as Morgan Stanley didn’t seem to surprise anyone who keeps an eye on the market, the downgrading of some of the banks shocked many analysts, including the downgrading of Credit Suisse by three notches which was the largest in the field of fifteen. Others downgraded included CitiGroup, the Royal Bank of Scotland, DeutscheBank, UBS, Goldman Sachs, JP Morgan, and others. Wells Fargo, which merged with North Carolina bank Wachovia, was not among those downgraded.
“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities”, says Moody’s Global Banking Managing Director Greg Bauer in a statement released at the debut of the new ratings. “However, they also engage in other, often market leading business activities that are central to Moody’s assessment of their credit profiles. These activities can provide important ‘shock absorbers’ that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges.”
Bank of America did not release an official statement on the new ratings. The Bank’s stock dropped on Thursday from over $8.00 per share down to around $7.82 per share, but then rose again in after hours traded, before rebounding today to around $7.92 per share.
The change in the rating could mean that the bank will have to pay more to acquire credit, but interest rates are at an all time low, with less than a 3 percent rate for a 15-year mortgage, meaning that the effects on the bank’s bottom line may be mitigated.
In downtown Raleigh, Bank of America tower is located next to the City Plaza and the bank has branches across the entire state of North Carolina. ::
Article Posted: June 22nd, 2012.