Credible & Fitch
Fitch Ratings moves ahead with downgrades.
Fitch Ratings' hard line stands in stark contrast to rivals S&P and Moody's (MCO), both of whom seem content to abstain from downgrades to prevent losses in the broader financial markets.
London-based Fitch cut its rating on Washington Mutual (WM) Friday two notches to "BBB," the second lowest investment grade rating according to Reuters. Fitch cited deteriorating performance in the thrift's home equity portfolio and significant exposure to subprime mortgages as the major factors contributing to the downgrade.
Fitch also announced it was reviewing Bank of America (BAC) and Citigroup (C) for possible downgrades due to exposure to residential home loans. Last week on the Buzz and Banter, we reported further details on the loan portfolios of major American banks. Fitch must have read the same report, saying in a statement:
"Indications from rated banks in the past few weeks suggest that home equity delinquency rates are rising at a far more rapid pace than even most bankers' and analysts' grim outlook for 2008 had anticipated."
Throughout the credit crunch, Fitch has been more aggressive with its downgrades of financial firms than S&P or Moody's. Bloomberg reports troubled bond insurer MBIA (MBI) is asking the firm to stop rating its debt. The two companies traded barbs: MBIA questioned Fitch's ratings methodology, while Fitch suggested MBIA has been less than forthcoming with details of its exposure to structured financial products.
According to Bloomberg, of the three major ratings firms, Fitch is the only one still considering a downgrade of MBIA,
Ratings issued by Fitch carry less weight than those of S&P or Moody's, but the company is positioning itself as a source for independent and unbiased credit evaluations. The move is a welcome one, as the prices fetched in recent forced asset sales exposes balance sheet weakness S&P and Moody's seem unable -- or just unwilling -- to find.
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