Herbert J. Sims & Co., Inc. - The Credit Landscape for Financial Institutions in 2008

The Credit Landscape for Financial Institutions in 2008

Creditworthiness, credit ratings and stock prices in the financial services sector are under extraordinary pressure in the last year, and more change is likely on the way. A survey of 27 leading financial institutions, including banks, investment banks and bond insurance companies reveals some stunning developments. In the last 12 months:

74% of these financial institutions have suffered some form of negative rating action;
59% of these companies have actually experienced one or more rating downgrades ;
59% currently have the potential for more downgrades in the future;
Only 15% have been able to maintain current ratings with stable outlooks; and
Through November 3, the drop in stock prices for these companies averaged -74.0%. in the last year. This number understates the decline, because it excludes a -17% average drop in stock prices that occurred in October 2007 as the financial crisis began in earnest.

Although three of these organizations suffered additional downgrades in October, S&P has started to indicate improving trends in this sector, with five companies seeing their outlook or rating watch status improve. Currently, four companies are on Rating Watch Positive, for possible upgrades.

The material presented here is for information purposes only and is not to be considered an offer to buy or sell any security. This was prepared from sources believed to be reliable but it is not guaranteed as to accuracy. Information and opinions are current as of the date of publication and are subject to change without notice. Herbert J. Sims & Co, Inc. does not assume the obligation or responsibility to update and or amend any such information.