S&P HITS BIGGEST US BANKS WITH CREDIT RATING DOWNGRADES / THE WALL STREET JOURNAL ( VERY HIGHLY RECOMMENDED READING )

November 29, 2011, 4:34 PM ET

S&P Hits Biggest US Banks With Credit Rating Downgrades

By Mark Gongloff

Everett

S&P wields the Downgrade Stick.

S&P has reviewed its credit ratings for 37 of the world’s biggest banks, cutting the ratings of several, including all of the Big Six.

This is not the most shocking news in the world, but it is not good news. Bank of America briefly traded below $5 after hours and was recently down to $5.02. It was dancing with $5 all day, as the financials lagged the market all day. Purely coincidental, we’re sure!

Here’s the full release from S&P — there’s not much to it — followed by the most notable downgrades:

Standard & Poor’s Ratings Services today said it reviewed its ratings on 37 of the largest financial institutions in the world by applying its new ratings criteria for banks, which were published on Nov. 9, 2011. See the Ratings List for the ratings on these banks, their core and highly strategic subsidiaries, and other subsidiaries that we took rating actions on as a result of applying our new criteria to their parents. We will review all ratings that we placed on CreditWatch within 90 days. Ratings on CreditWatch are designated as Watch Neg or Watch Pos in the list below.

We will publish individual research updates on the bank groups identified below, including a list of ratings on affiliated entities, as well as the ratings by debt type — senior, subordinated, junior subordinated, and preferred stock. The research updates will be available at www.standardandpoors.com/AI4FI  and on RatingsDirect on the Global Credit Portal. Ratings on specific issues will be available on RatingsDirect on the Global Credit Portal and www.standardandpoors.com.

They downgraded pretty much everybody of note in the US — BofA, Citigroup, Morgan Stanley, Goldman Sachs, Wells Fargo, J.P. Morgan, Bank of New York Mellon.

The Bank of China got cut to A from A-. Industrial and Commercial Bank of China was left alone.

They also hit several UK banks — Barclays, HSBC, Lloyds, RBS.

Notably, they left alone several European banks — Deutsche Bank, Credit Suisse, ING, BNP Paribas, Credit Agricole, Societe Generale, Commerzbank.

They cut UBS, however, to A from A+.

All of the downgrades were one notch, as near as I can tell.

Bank of America, Citi, Goldman Sachs and Morgan Stanley got cut to A- from A.

Barclays and J.P. Morgan were cut to A from A+.

Wells Fargo, BNY Mellon and HSBC were cut to A+ from AA-.

Otis Casey at Markit says the CDS spreads are widening for the Big Six post downgrade — not terribly much, though it is after hours.

Here’s a link to the complete report, along with the full list of all banks and subsidiaries affected.