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Fitch Warns of Possible Bank Downgrades 24 minutes ago From the FAZ board. This will be read on every major trading desk come Monday.
Fitch warns on possible bank downgrades
By John Spence, MarketWatch
Last Update: 3:11 PM ET May 15, 2009
BOSTON (MarketWatch) -- Fitch Ratings on Friday gave the markets notice that it may issue wholesale ratings downgrades on the U.S. banking sector if credit conditions and the economy continue to worsen.
Fitch placed nine U.S. banks on its so-called Rating Watch Negative: BB&T Corp. (BBT), Discover Financial Services (DFS), Fifth Third Bancorp (FITB), KeyCorp (KEY), M&T Bank Corp. (MTB), Popular Inc. (BPOP), Regions Financial Corp. (RF), SunTrust Banks Inc. (STI) and Wells Fargo & Co. (WFC).
The move reflects the view that the banks "show an incrementally higher level of vulnerability to the credit deterioration which Fitch expects to continue across virtually all loan categories," the ratings agency said.
"This is anticipated to place additional stress on earnings, as provision requirements are likely to remain elevated over the intermediate term," Fitch added.
The SPDR KBW Bank ETF (KBE) was down 2% in afternoon trade Friday.
Fitch said it expects the "majority" of the downgrades to be limited to a single notch.
The firm said the credit problems that started in residential real estate have accelerated and spread to other markets.
"Of note, credit-card loss rates spiked significantly in the past two quarters," Fitch warned. Also, "there remains considerable risk of meaningful erosion in loss rates on commercial real estate and, to a lesser extent, commercial and industrial loans."
Fitch said it expects to wrap up its review of the nine U.S. banks within the next month, "with the potential for rating actions sooner for those issuers that are viewed as under greater stress."
John Spence is a reporter for MarketWatch in Boston.
Sentiment : Sell
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