Fitch to review major banks for possible downgrade
Fitch Ratings placed the ratings for Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) on review for a possible downgrade Thursday, along with five major European banks. Fitch cited more uncertainties on economic conditions and litigation tied to mortgage risks for the placement of BofA's viability on rating watch negative. Specifically, Fitch was concerned about the June settlement related to Countrywide mortgage-backed securities, recent lawsuits from American International Group (AIG), the Federal Housing Finance Agency and the ongoing state attorneys general talks. "Secondarily, BAC's loan exposure to the U.S. residential real estate market remains a concern, particularly given the potential for continued pressure on real estate values combined with economic uncertainties," Fitch said. Fitch also placed five other global investment banks including Goldman, Morgan Stanley, Barclays Bank, BNP Paribas, Credit Suisse, Deutsche Bank and Société Générale. The downgrades in most cases would be one notch and at most two, according to Fitch. "These challenges result from both economic developments, particularly in the euro area, as well as a myriad of regulatory changes," Fitch said. The analysts did point out that these banks are fundamentally stronger than they were before the start of the financial crisis in 2008, but intense regulation, competition and increasing exposure to developments globally warrant the potential for a downgrade. Write to Jon Prior. Follow him on Twitter @JonAPrior.