S&P Looking For More Bank Losses (WFC, CMA, USB, BBT, RF, COF, FITB, HBAN, SNV, WTNY, FAS)

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Standard & Poor’s may still have at least some relevance in its debt ratings.  This morning we saw a wave of downgrades at banks by the debt ratings agency on systematic-risk and non-systematic risk.   We tried to shorten this up to the most concise report in rating groups as this is hitting many of the bank stocks pretty hard this morning. Wells Fargo & Co. (NYSE: WFC), Comerica (NYSE: CMA), USBancorp (NYSE: USB), BB&T Corp. (NYSE: BBT), Regions Financial Corp. (NYSE: RF), Capital One Financial Corp. (NYSE: COF), Fifth Third Bancorp (NASDAQ: FITB), Huntington Bancshares Inc. (NASDAQ: HBAN), Synovus Financial Corp. (NYSE: SNV) and Whitney Holding Corp. (NASDAQ: WTNY) were all in the wave of S&P downgrades.  This news has the extremely volatile Direxion Daily Financial Bull 3X Shares (NYSE: FAS) triple leverage financial sector ETF down 7% at $8.60.

Wells Fargo & Co. (NYSE: WFC) was cut to AA- from AA.  It is off watch but the outlook is negative.  Comerica (NYSE: CMA) was cut to A- from A, and it is off watch and the outlook is negative.  USBancorp (NYSE: USB) was cut to A+ from AA, and it is off watch and the outlook is stable.  BB&T Corp. (NYSE: BBT) was cut to A from A+, and is off watch and the outlook is stable.

Regions Financial Corp. (NYSE: RF) was cut to BBB+ from A, and it is off watch but the outlook is negative.  Capital One Financial Corp. (NYSE: COF) was cut to BBB from BBB+.  Fifth Third Bancorp (NASDAQ: FITB) was cut to BBB from A- and the outlook is negative.  KeyCorp (NYSE: KEY) was cut to BBB+ from A-, and is off watch and the outlook is negative.

Huntington Bancshares Inc. (NASDAQ: HBAN) is now junk.  S&P cut it to BB+ from BBB, and it is off watch but the outlook is negative.  Synovus Financial Corp. (NYSE: SNV) and Whitney Holding Corp. (NASDAQ: WTNY) were also cut to Junk Rating.

Associated Banc Corp. (ASBC), Astoria Financial (AF), PNC Financial (PNC), Susquehanna (SUSQ), Valley National Bancorp (VLY), Webster Financial (WBS), and Wilmington Trust (WL) were also part of this major downgrade.

It seems that S&P has figured out that the future of banks will not be as good as things were in the past.   It sees stress tests pointing to more pain ahead and losses above current expectations.  S&P sees weaker operating conditions ahead.  Before you go run into a panic about write-downs and losses, keep in mind that S&P has had many of these banks under review for more than six months.  It is also not exactly as though S&P (and Moody’s for that matter) was ahead of the curve in catching the banking and lending crisis that got us where we are today.

Jon C. Ogg