The Banking and Strategy Initiative

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Citi, Morgan Stanley and BofA: Top 3 retail banks to lose ratings power | Banking Insight

NYTimes ( was first with the scoop of course and I for one never suspected that there could be such astorm in a tea cup waiting to derail the banks this year. Though Morgan stanley has often been counted as being a Wall Street firm in the last three years it has mostly made big losing trades every once in a while while keeping its fund management unit ( Retail Wealth) a power center and the growing arm of the bank. Be that as it may, Wells Fargo and JP Morgan, are the two retail powerhouses that have survived the crisis mostly and while Citi and BofA almost came back from the dead and MUFG invested enough in Morgan stanley at just the right times, these three are again the cross hairs of rating agency Moodys’ which this time means that their CDS will add spreads of 50 – 100 bps when the ratings downgrades come through and in many cases the wholesale arms, already suffering from weakness in Investment Banking business , not the vaunted Volcker rule that has JP Morgan and Goldman Sachs treading lightly.

Market making and underwriting from almost 70% of SME and muni / leveraged issuers an important market in 2012 will likely stop going to knock at Citi and BofA as opportunities as another credit downgrade takes their borrowing power to another bank rate benchmark at least 60 bp away from any Tier I Investment Bank. The moodys’ messaging is due in the markets by May 2012. Goldman Sachs is set for a bumper harvest without the Oil and  commodities fly out affecting Q1 almost in the same breath as BofA probably chalks one to a faster IPO calendar in the next six months ( only announcement)

NEW YORK, NY - MARCH 15:  The floor of the New...

NEW YORK, NY - MARCH 15: The floor of the New York Stock Exchange is viewed on March 15, 2012 in New York City. Following a public resignation of an employee for the global banking firm Goldman Sachs which appeared in The New York Times yesterday as an op-ed, renewed scrutiny of both the company and the practices of Wall Street have begun among the public and media. The employee, a former vice president named Greg Smith, said the company was not working in the interests of its clients and that a culture of short term gains and greed had taken over at the company. (Image credit: Getty Images via @daylife)

BofA adding a new thinking layer for powering an International beach head

BofA especially is trying to beef up its international operations again and while that idea is already weakened by staff leaving Europe and Asia ops, not to mention its own asset sales in the last few months including Spanish/Irish card operations, stake in Chinese CCB and more, setting up costs and likely build up of an order pipeline from interested customers will likely be hit hard as BofA is unable to bring any borrowing strength to the table which is a key handicap for Asian and now European Banks looking to share business with Global banks to leverage effective borrowing costs more akin to their clients’ ‘real’ ratings power unhinged by their currency/trade/other limitations in Asia or Latin America.

Goldman Sachs for example will be relying on its funding strengths when it tries to pry open a larger Oyster from Asia’s untapped markets including the much talked about India and china as trade itself grows 5-10 times in the next 10 years or local currencies and companies occupy a larger share of global real estate and share of business.

Dealbook: Moodys’ Downgrade

WSJ: BofA looking back to Intl growth

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The Banking and Strategy Intiative: Bank of America Comeback: Selling office towers (and Spanish credit cards)

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