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Banking, finance, and taxes

Citi & UBS Under S&P Eagle Eye (MFG, UBS, C, HBC, GS)

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By Douglas A. McIntyre Updated Published
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Many, or most, major banks do not have enough capital to comfortably maintain their current ratings.  Standard & Poor’s has a report out saying that the banks are underfunded despite capital raised and despite the recovery we have seen.  Standard & Poor’s introduced a new tracking for capital adequacy and even questions how useful standard market and regulatory measures are.  Citigroup Inc. (NYSE: C) and UBS AG (NYSE: UBS) are two of the trouble spots outlined herein.

In the larger international banks, S&P noted that the average risk-adjusted capital ratios in those banks it reviews was 6.7%.  That is over 3% under average tier one ratios.  S&P believes that the current capital “remains a neutral to negative rating factor for the majority of banks” it covers. S&P now believes that banks need to have a risk-adjusted capital ratio of at least 8%.  S&P has issues over tier one and leverage ratios, because they do not adjust for risks and are not consistent.

Mizuho Financial Group Inc. (NYSE: MFG) was listed as the most vulnerable at an approximate 2% ratio; and UBS AG (NYSE: UBS) and Citigroup Inc. (NYSE: C) remained among the weaker banks.

HSBC Holdings PLC (NYSE: HBC) was the strongest with a 9.2% ratio; and ING Bank NV (NYSE: ING) and Goldman Sachs Group Inc. (NYSE: GS) were also listed in the stronger bank category.  24/7 Watt St. still argues that Goldman Sachs is a bank that is truly no bank.

When you see reports like this it is not always a signal of an imminent downgrade.  But the tone sure sounds more like downgrades are coming if more capital is not raised or if things do not just start to improve on their own.

JON C. OGG

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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