Moody’s never sleeps: German and Austrian lenders downgraded
Among the victims under fire were Germany’s second biggest lender Commerzbank, as well as Dresdner and Landesbank – also on the list the country’s top 10.
“Today's rating actions are driven by the increased risk of further shocks emanating from the euro area debt crisis, in combination with the banks' limited loss-absorption capacity,” Moody’s explained in its press-release.
The rating agency held off Germany’s number one lender Deutsche Bank AG and its subsidiaries, saying that it “will be concluded together with the reviews for other global firms with large capital markets operations.”
In Austria, Moody's cut the long-term rating for Erste Group Bank AG as well as changing the outlook to negative. UniCredit Bank Austria AG and Raiffeisen Bank International AG also lost out, with the outlook now being negative for the first and stable –for the latter.
“The fact that these are German and Austrian banks that ended up at the economists’ crosshair points to the globalization of the slump in the financial sector,” says Anna Bodrova from Investcafe.
The move didn’t come out of the blue, agreed Johan Van Overtveldt, editor-in-chief of both of Belgiums leading business magazines, Trends and Knack.
“Nobody will escape [a downgrade], even Germany and German banks if we continue to handle this crisis in the way we’ve been doing for the past 2 years. A lot of talk, but not much specific and well targeted action in order to solve this crisis,” Overtveldt told RT.
Just a day earlier Moody’s downgraded two lenders in Greece that are closely tied to French banking. Emporiki Bank that fully belongs to French banking group Credit Agricole and Geniki Bank, where Societe Generale holds a 99% stake, saw their ratings cut on Tuesday.
The downgrades follow a bunch of negative economic data from the locomotive economies in the euro zone – Germany and France. Tuesday PMI report for May pointed to a slowdown in business activity in the two countries, saying that “German output fell for the first time since last November and, although only modest, the rate of decline was the fastest for almost three years.”
“While Germany is contracting only marginally, alarmingly steep downturns are evident in Spain, Italy and now also France. Italy seems to be faring the worst, with its PMI consistent with GDP falling by more than 1% in the second quarter. However, declines could also exceed 0.5% in both France and Spain,” the report added.
The ongoing downgrades come as a part of Moody’s broad review of financial institutions across Europe and the US that was announced in mid April. Other massive revisions include last week cuts for 9 Danish, as well as 3 Finnish banks.
Financial analyst Max Keiser is skeptical about the downgrade. “Moody’s is not an impartial judge in this. They were caught picking sides during the 2008 crisis. They are a publicly-listed company where Warren Buffett is a huge shareholder. They don’t downgrade Wells Fargo, a bank where Buffet has an interest, but they downgrade other countries and banks that are not within their 'pay-for-ratings' scheme. Moody's is highly corrupted,” Keiser said.