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Financial Stocks Roundup: Bank of America, Citigroup Fight Back Against Impending Moody's Downgrade


The big banks aren't going to take a credit downgrade without a fight, Credit Suisse profit drops 96%, and the SEC blows a deep throat's cover.

The biggest American banks are facing impending downgrades from Moody's later this spring, and they aren't just sitting back and taking it. The Wall Street Journal reports that Bank of America (BAC) CEO Brian Moynihan, James Gorman of Morgan Stanley (MS), and Citigroup's (C) Vikram Pandit have gone as far as to visit the ratings firm in person to argue against the downgrades that are expected later in the spring. A Goldman Sachs (GS) executive publicly called Moody's methods into question in an earnings call last week.

The extent of the banks' resistance might show that, in contrast to the credit downgrades in the aftermath of the financial crisis, the banks are more confident of their capital positions. Tier 1 capital ratios have risen across the board for banks over the past few years.

There is plenty of money on the line here. The Journal estimates that the five biggest banks could collectively face $22 billion in extra borrowing costs if Moody's goes ahead with the downgrades.

Credit Suisse (CS) booked a first quarter profit of 44 million Swiss francs ($48 million), a 96% drop from the year earlier. Analysts were expecting a 436 million franc loss. In the last quarter, Credit Suisse lost 637 million francs. The Swiss bank's profits were hit hardest by a 1.55 billion franc accounting loss on its own credit. Excluding one-time charges, the bank booked 1.355 billion francs.

Economic headwinds and a changing regulatory environment are weighing on many European banks. Credit Suisse is exiting risky businesses and reducing costs by cutting 3,500 jobs. Credit Suisse shares fell 3.78% in New York today.

The major banking stocks are all in the red today. The Financial Sector Select SPDR ETF (XLF) gained 0.10% and the KBW Bank Index (^BKX), which tracks 24 US banks, is virtually flat, up 0.02%.

The Securities and Exchange Commission totally blew a whistleblower's cover when it showed a witness the source's notebook. Pipeline Trading Systems was being investigated for a dark-pool stock trading platform and misleading investors. The executive recognized the handwriting and identified the whistleblower that reported the firm. Just another feather in the SEC's cap.

American International Group (AIG) has accused Steven Udvar-Hazy, a former AIG airline leasing executive, of stealing trade secrets, customers, and business deals for Air Lease, a firm that he started after leaving American International Group.

Twitter: @vincent_trivett
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