S&P Cuts Barclays, Credit Suisse and Deutsche Bank Ratings

on Jul 3, 2013
Updated: Feb 27, 2024

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iNVEZZ.com, Wednesday, July 3rd: Barclays Plc (LON:BARC, NYSE:BCS), Credit Suisse (NYSE:CS) and Deutsche Bank (ETR:DBK, FRA:DBK, NYSE:DB) all had their credit ratings cut by Standard & Poor’s late on Tuesday, with the rating agency citing rising uncertainty around the investment banking model and exposure to the Eurozone crisis as reasons for the downgrade. Barclays’ share price shed more than four percent in early trading in London today, whereas Deutsche’s share price dropped in early German trading. Credit Suisse’s share price closed more than one percent lower in New York yesterday. Both Credit Suisse and Deutsche Bank declined in after-hours trading on the NYSE.

**Barclays, Credit Suisse and Deutsche Bank Downgraded**
Long-term counterparty credit ratings for the three banks were cut to A from A-plus, with the outlook remaining stable. The rating agency said it considered that the banks’ debt-holders faced “heightened credit risk owing to the industry’s tighter regulation, fragile global markets, stagnant European economies and rising litigation risk stemming from the financial crisis”.

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“A large number of global regulatory initiatives are increasingly demanding for capital market operations,” S&P added.
The credit rating agency S&P affirmed its A long-term rating and A-1 short-term credit rating on UBS AG (NYSE:UBS), saying that it considered the lender to be “the most active bank in reducing its exposures to investment banking”. UBS’s share price also closed lower in New York on Tuesday but was unchanged in after-hours trading.

**Investment Banking Risks**
As the Financial Times noted in its coverage of the news, while the S&P statements on Barclays, Credit Suisse and Deutsche were worded differently, the message for the three institutions was broadly the same. Barclays, Britain’s third-largest bank by market value, was downgraded partly on account of its dependence on investment banking.

Deutsche, Germany’s biggest lender, was said to be facing risks in its investment banking operations whereas Credit Suisse, the second-biggest Swiss bank, was said to be getting half of its revenue from investment banking.
Bloomberg quoted S&P as saying that the three downgraded lenders together with UBS were “among the most exposed in Europe to a combination of regulatory initiatives being undertaken globally on capital market-related businesses”.

!m[Rating Agency Cites Uncertainty around Investment Banking Model](/uploads/story/3611/thumbs/pic1_inline.jpg)
Barclays is currently under pressure from the UK Prudential Regulation Authority (PRA) to introduce stricter capital requirements. The PRA said last month that it would set a leverage ratio of three percent for UK banks, limiting the amount they could lend relative to their capital. The regulator noted that Barclays had a leverage ratio of 2.5 percent after adjustments.
**Barclays’ share price was 4.15 percent down at 271.25p in London as of 08:51 BST on 3 July 2013. In New York, Barclay’s share price closed 1.33 percent lower at $17.03 on July 2.**
**Deutsche’s share price was 3.37 percent lower in Frankfurt at €30.66 and 2.95 percent lower at €30.98 on the Deutsche Boerse Xetra as of 9:43 CEST on July 3. In New York, Deutsche Bank’s share price closed 2.02 percent lower at $41.13 on July 2 and declined 0.27 percent to $41.02 in after-hours trading.**
**Credit Suisse’s share price closed 1.25 percent lower at $26.87 in New York on July 2 and declined 0.04 percent to $26.86 in after-hours trading.**
**UBS’ share price closed 1.63 percent lower at $16.92 in New York on July 2.**
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