S&P: More downgrades possible for U.S. banks

Aug.21, 2008 in Market Outlook

By Sue Chang

SAN FRANCISCO (MarketWatch) — Standard & Poor’s Ratings Services said more downgrades are possible for U.S. banks, which are only about halfway through the credit downturn, according to a report released Thursday. However, rating actions on banks and brokerages will remain selective rather than broad, said S&P analysts at a quarterly teleconference earlier this month. They also noted some positive trends such as revenue strength, asset divestitures, capital raising, and regulatory moves. “What we’re really trying to answer in our own minds is which banks are going to have the financial flexibility to deal with some fairly serious problems over the next seven to eight quarters. Obviously, these are very unprecedented times, and so financial flexibility–in the form of the ability to raise capital and/or in the form of the ability to sell assets–is going to be paramount,” said Tanya Azarchs, an S&P credit analyst. She added that investor confidence continues to be “skittish” as loan portfolios of banks are deteriorate rapidly.

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