Tag Archives: Fitch

Fitch Places Goldman Sachs on Negative Credit Watch

This is interesting: Fitch Ratings have just announced that the agency has placed The Goldman Sachs Group, Inc.‘s ‘A+/F1+’ long- and short-term Issuer Default Ratings (IDRs) and ‘a+’ Viability Rating (VR) on Rating Watch Negative. A whole bunch of major global banks gets the same treatment. I don’t think it matters that much to Mr. Blankfein & Co, thou – after all they’re just doing “God’s Work” – but it sends a signal to the market, adding a few more drops of uncertainty.

“Any adverse rating outcome would likely be limited to a one-notch downgrade of the long- and short-term IDRs, given the company’s stronger balance sheet and enhanced liquidity position relative to historical norms.”

Fitch Ratings

“In conjunction with a broad, global review of financial institutions and more specifically, global trading and universal banks, Fitch has placed several issuers on Rating Watch Negative, including Goldman Sachs (GS). Refer to the NRAC entitled ‘Fitch Places Seven Global Trading and Universal Banks on Rating Watch Negative,” the rating agency says in a press release.

Fitch believes that GS’s business model, like other global trading and universal banks face structural challenges given its wholesale funding profile and greater reliance on trading revenues.

“Fitch recognizes the steps GS has taken to diversify and extend its funding sources, as well as to de-lever its balance sheet, which will be reviewed in the context of other global financial institutions.”

The resolution of the Rating Watch Negative, which is expected to occur in the near term, will be based upon further analysis of the company and its peers, Fitch adds.

“Any adverse rating outcome would likely be limited to a one-notch downgrade of the long- and short-term IDRs, given the company’s stronger balance sheet and enhanced liquidity position relative to historical norms. This, combined with its leading positions in global capital markets are key franchise strengths supporting the firm’s ratings.”

The Goldman Sachs Group, Inc. is a global bank, providing underwriting, trading, financial advisory, asset management and securities services.

Business activities are now divided into four segments:

–Investment Banking;
–Institutional Client Services;
–Investing and Lending; and
–Investment Management.

Fitch places the following ratings on Rating Watch Negative:

Goldman Sachs Group, Inc.
Long-term Issuer Default Rating (IDR) ‘A+’;
— Long-term senior debt ‘A+’;
— Viability Rating ‘a+’
— Short-term IDR ‘F1+’;
— Commercial paper ‘F1+’;
Short-term debt ‘F1+’;
— Market linked securities ‘A+emr’;
Subordinated debt ‘A’;
Preferred equity ‘A-‘.

Goldman Sachs Bank, USA
— Long-term IDR ‘A+’;
— Long-term senior debt ‘A+’;
— Long-term deposits ‘AA-‘;
— Short-term IDR ‘F1+’;
— Short-term debt ‘F1+’;
— Short-term deposits ‘F1+’.

Goldman, Sachs & Co.
— Long-term IDR ‘A+’;
— Short-term IDR ‘F1+’;
— Long-term senior debt ‘A+’;
— Short-term debt ‘F1+’.

Goldman Sachs Bank (Europe) Plc
–Senior secured guaranteed debt at ‘A+’;
–Short-term secured guaranteed debt at ‘F1+’;
–Short-term debt at ‘F1+’.

Goldman Sachs International
–Senior secured guaranteed debt at ‘A+’;
–Short-term secured guaranteed debt at ‘F1+’;
–Short-term debt at ‘F1+’.

Goldman Sachs Paris inc. et Cie.
— Long-term IDR ‘A+’;
— Short-term IDR ‘F1+’.

Goldman Sachs Capital I
Trust preferred ‘A-‘.

Goldman Sachs Capital II, III
— Preferred equity ‘A-‘.

Ultegra Finance Limited
— Long-term senior debt ‘A+’;
— Short-term debt ‘F1+’.

Fitch affirms the following:

Goldman Sachs Group, Inc.
— Senior unsecured debt FDIC ‘AAA’;
— Short-term debt FDIC guaranteed ‘F1+’;
— Individual ‘B/C’;
— Support ‘5’;
— Support Floor ‘NF’.

Goldman Sachs Bank, USA
— Senior unsecured debt FDIC ‘AAA’;
— Short-term debt FDIC guaranteed ‘F1+’;
— Support ‘1’.

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Spain Loses AAA Rating – Here's The Full Report

Fitch Ratings strips Spain of one its A’s by downgrading the country’s long term credit rating to AA+, from AAA.  Fitch anticipates that the economic adjustment process in Spain will be more difficult and prolonged than for other economies. Here’s the full rating report from Fitch.

“Fitch believes the Spanish government could find it hard to implement some of the expenditure cuts. In particular, the agency has some doubts over the feasibility of the cuts that need to be made by Spain’s autonomous communities.”

Fitch Ratings

“The downgrade reflects Fitch’s assessment that the process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium term,” the rating agency writes in its special report on the Spanish economy.

Fitch Ratings downgraded Spain’s Long‐Term Foreign‐ and Local‐Currency Issuer Default Ratings (IDRs) to ‘AA+’ from ‘AAA’ on 28 May 2010.

Despite these expectations, the Stable Outlook on Spain’s sovereign rating reflects Fitch’s view that the country’s credit profile will remain very strong and consistent with its ‘AA+’ rating, even in the event of some slippage relative to official fiscal targets, Fitch analysts says.

The Spanish government has announced an ambitious fiscal consolidation plan to ensure a return to sustainable public finances after the global financial crisis.

Fitch believes the Spanish government could find it hard to implement some of the expenditure cuts. In particular, the agency has some doubts over the feasibility of the cuts that need to be made by Spain’s autonomous communities, who may also see a reduction in the transfers they will receive from the state budget.

“Nevertheless, Fitch believes the risk that economic growth will fall short of the government’s projections is a more important consideration. The Spanish government is forecasting a sharp recovery in private consumption and investment. Fitch believes that Spain’s unemployment rate, the legacy of its construction boom, and its high level of indebtedness will weigh on private consumption and investment in the medium term.”

Consequently, Fitch is forecasting weaker growth for the Spanish economy in the medium term than the government is, although the agency’s projections on the contribution of net trade to growth in the medium term are slightly more optimistic than those of the government, the report says.

“Slightly” More Pessimistic

Anyway – the rating agency have trouble seeing how the Spanish government will be able to meet its growth projections for the next decade.

I’m not sure if I would call a difference in the  GDP projections of 1,2 – 1,3 percentage points (about 35%) for “slightly” lower, but that not the biggest issue here.

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Here’s a copy of the full rating report from Fitch.

Latest: U.S. stock market takes another beating after the news about the downgrade of Spain. Stocks currently down between 2,5 and 3,8 percent.

Check the U.S. markets live indicators at high5finance.

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