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Standard & Poor’s Says Banking Crisis Has Entered New Phase

By Jason Simpkins
Managing Editor
Money Morning

Even though the government stress tests have ended and the banks in question have set about raising the required capital, credit rating agency Standard & Poor’s believes the nation’s banking crisis has “merely entered a new phase” and might not end before 2013.

At least seven of the 10 banks considered by the government to be inadequately capitalized, as well as two others that were found to have sufficient capital cushioning, announced fundraising plans following the release of the stress test results.

PNC Financial Services Group Inc. (NYSE: PNC), U.S. Bancorp (NYSE: USB), KeyCorp (NYSE: KEY), Citigroup Inc. (NYSE: C), Morgan Stanley (NYSE: MS) Wells Fargo & Co. (NYSE: WFC), and Bank of America Corp. (NYSE: BAC) all announced stock offerings or asset sales in the past week.

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BB&T Corp. (NYSE: BBT) and Capital One Financial Corp. (NYSE: COF), which were deemed by the government to be sufficiently capitalized, have also announced stock offerings.

Still, S&P says the banks, which have will continue to struggle without a bigger capital cushion than regulators require.

“There’s nothing to say that this banking crisis can’t go on for another three or four years,” S&P Managing Director Tanya Azarchs said.

S&P on May 4 said it might lower its ratings for 23 U.S. banks and thrifts, including 10 that underwent stress tests, citing concern about the industry’s capitalization, Reuters reported. It said the 23 companies had at least a 50% chance of being downgraded within 90 days.

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  1. Pingback by S&P Makes Good On Most of Bank Downgrade Promise on 17 June 2009:

    [...] cut the credit ratings of 18 banks, citing further weakening in the financial sector, after it said last month that 23 banks have a 50% chance of being downgraded within 90 [...]

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