Last Call: Cuts Like a Knife — Moody's Downgrades Banks

Scott Eells | Bloomberg | Getty Images

There's times I've 'bin mistaken
There's times I thought I'd 'bin misunderstood
So wait a minute darlin'
Can't you see we did the best we could

-Bryan Adams, “Cuts Like a Knife”

Below, Moody’s makes its long awaited downgrades.

Market Musings With CNBC Market Guru Robert Hum

  • Rotten mood on Wall Street ahead of Moody’s downgrade of global banks
  • Dow, S&P 500 and Nasdaq have worst day in 3 weeks, 2nd largest drop this year
  • Major averages lose week’s gains following steep drop today
  • Materials, Energy sectors close down over 3 percent
  • Commodities hammered: Crude oil falls below $78, gasoline & silver settle at 52-week lows

Bank Ratings Scorecard

Moody's Cuts Bank of America Ratings 1 Notch to Baa2 from Baa1

Moody's Cuts JPMorgan Chase Rating 2 Notches to A2 from Aa3

Moody's Downgrades Citigroup Rating 2 Notches to Baa2 from A3

Moody's Downgrades Morgan Stanley Rating 2 Notches to Baa1 from A2

Morgan Stanley Had Faced a Potential 3-Notch Downgrade

Morgan Stanley: ratings still do not fully reflect the key strategic actions taken by bank

Moody's Lowers Goldman Sachs Rating 2 Notches to A3 from A1

The Word on the Street Tonight

15 MAJOR INVESTMENT BANKS SEE RATINGS CUT BY MOODY'S/CNBC – Mary Thompson & Margaret Popper: “Moody’s Investors Service downgraded the debt ratings of 15 major international banks and securities firms on Thursday, a move that could cost the banks billions of dollars in extra collateral. … All the ratings cuts for the US banks were expected, except for Morgan Stanley , whom some thought would be cut three notches instead of two. The ratings agency said that the banks were downgraded because their long-term prospects for profitability and growth are shrinking. The ratings agency said it was especially concerned about banks with significant capital market activities during a time of increased volatility in markets."

MORGAN STANLEY SCREAMING BUY: PRO/CNBC – Lee Brodie: “Even after a two notch downgrade from Moody’s, top money manager Charlie Bobrinskoy says Morgan Stanley is a screaming buy. Bobrinskoy, who is vice chairman & portfolio manager at Ariel Investments thinks the market is pricing too much pessimism. “There’s no doubt the business is challenged," he admits. "Volumes are down and risk appetite is down – but that’s a short term phenomenon.”

HEARD ON THE STREET: MORGAN GETS ITS WAY WITH MOODY'S/WSJ – David Reilly: “For Morgan Stanley, two's a charm. The bank's credit rating was cut two notches by Moody's Investors Service on Thursday. While painful, it was a big win for the firm, given the three-notch downgrade Moody's had threatened. That should take pressure off Morgan's bloodied stock, which had seemed to have priced in three notches, even as it raises questions about whether Moody's succumbed to Wall Street pressure.”

BANK STOCKS JUMP AFTER MOODY’S DOWNGRADES/WSJ – Steven Russolillo: “Here comes the relief rally in bank stocks. Moody’s just downgraded five U.S. banks amid a broad reassessment of big, global banks, a move that has been widely expected since the ratings firm put 17 banks under review back in February. Moody’s downgraded 15 banks in all (two of the 17 banks had been downgraded earlier this year). Bank stocks are actually rising on the news, as the cuts weren’t as severe as previously expected.”

EU BANKS' RISK IN EYES OF BEHOLDER/WSJ – David Enrich & Max Colchester: “Regulators and investors are concerned that some European banks are artificially boosting a key measure of their financial health, a worry that is further eroding market confidence in the Continent's banks. Such concerns have been building up for more than a year. But they have intensified lately, with a parade of banks announcing that they intend to increase their capital ratios—a key gauge of their abilities to absorb future losses—partly by tinkering with the way they assess the riskiness of their assets.”

BLACKROCK FUND MANAGER TO LEAVE/WSJ – Jason Zweig: “Daniel J. Rice III, co-manager of $4.4 billion in energy assets at BlackRock Inc. , will leave the firm at year end, the world's largest asset-management firm announced Thursday. Mr. Rice's departure comes after The Wall Street Journal reported potential conflicts of interest between his family's private energy investments and the natural-resources portfolios he managed for BlackRock's clients. Mr. Rice's flagship BlackRock Energy & Resources Fund has outperformed 96% of its peers over the past decade. His family had also sunk some $65 million in their private firm, Rice Energy, which operates in the same natural-gas industry that he invests in for the BlackRock funds."

TWITTER BLAMES 'BUG' FOR OUTAGE/WSJ – John Letzing: “Twitter Inc.'s popular microblogging service was intermittently unavailable to users for significant stretches of time on Thursday, as the company blamed a "bug" that disrupted its system. Service has now been restored, Twitter said."

CALIFORNIA WORKS OUT BUDGET DEAL/WSJ – Vauhini Vara: “California Gov. Jerry Brown and the state's legislative leaders agreed Thursday on a $92 billion budget plan that would close the state's deficit for the fiscal year starting on July 1. Legislators will meet next week to vote on the budget, which is expected to pass by the time the fiscal year begins, marking the second on-time budget in a row for a state formerly plagued by perpetual budget delays. On-time passage would bolster California's reputation among the investors who buy its bonds and avert the cash-management emergencies that can result from late budgets.”

AIG DOCKS UNIT CHIEF $1 MILLION AFTER RELATIONSHIP WITH EMPLOYEE/WSJ – Serena Ng, Joann Lublin & Daniel Michaels: “American International Group Inc. cut the pay of Henri Courpron, chief executive of its aircraft-leasing unit, after discovering he had a personal relationship with an employee he supervised. Mr. Courpron, who runs International Lease Finance Corp., will see his $5.4 million salary slashed by $1 million, or 19%, as punishment for behavior that was "contrary to AIG's expectations of its officers," the government-controlled insurer said Thursday. Mr. Courpron will also get a new boss. Laurette Koellner, a former Boeing Co. executive and an AIG board member, was appointed ILFC's executive chairman, a new position. Mr. Courpron had previously reported directly to AIG Chief Executive Robert Benmosche."

BLACKROCK DISCLOSES DOLL'S MODELS NOT ALL HIS OWN/Reuters – Jessica Toonkel: “In January, BlackRock Inc made a significant, but easy-to-miss change in the fund literature for three of its mutual funds. In previous prospectuses, the New York-based firm said a "proprietary multi-factor quantitative model" formed the investing strategy for its $3.7 billion Large Cap Series funds, managed by retiring Chief Equity Strategist Bob Doll. This year's fund literature said the investing model used "quantitative factor models generated by third-party research firms." Typically such a change indicates a shift in a fund's methodology. But there was no shift in the investment process. Instead, the new description came after the funds' board of directors learned that the investment models used for Doll's funds were never proprietary and had been based on other firm's models, according to two people familiar with the situation.”

NEW YORK TIMES ADD TECH HEAVYWEIGHTS TO ITS BOARD/Reuters – Peter Lauria: "The New York Times Company on Thursday added to its board two directors with deep roots in the technology industry. Brian McAndrews, a former Microsoft Corp executive, and Joichi Ito, an Internet entrepreneur and head of the Media Lab at the Massachusetts Institute of Technology, were elected to the newspapers publishers' board, the company announced in a statement.”


Before the bell:

Carnival Corp, Darden Restaurants

Key Guests

Bill Strauss, Federal Reserve Bank of Chicago (630a)

Tony Crescenzi, PIMCO EVP (700a)

Clarence Otis Jr, Darden CEO (710a)

Mark Yusko, Morgan Creek Capital Management CEO (810a)

John Carlson, Fidelity Fund Manager (840a)

Darren Julien, Julien's Auctions CEO (150p)

Nicky and Michael Bronner, Unreal Brands Founding Partners (250p)

David Cordani, Cigna CEO (300p)

Harvey Weinstein, The Weinstein Company Co-Chairman (440p)

Jim Garland, Sharp Details CEO (700p)

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