ETFs That Could Be Affected by Today's 11 Downgraded Banks

Eleven U.S. and European banks that can count themselves as top holdings in some exchange traded funds found themselves downgraded by Standard & Poor’s Ratings Services this morning.

S&P bases the downgrade on pressures facing the large financial institutions in the future, because of increasing risk and a worsening global recession, reports Kerry E. Grace for the Wall Street Journal. They note that government intervention in order to bring stability to the sector should balance out some of the pressure, though.

In ordinary times, S&P doesn’t consider government support to be a factor in its ratings process. But so many governments have stepped in that an exception has been made. None of the banks should have a rating lower than A+, because of the expectation of that support.

Banks downgraded are: Bank of America (BAC), Barclays, Citigroup (C), Credit Suisse Group (CS), Deutsche Bank (DB), J.P. Morgan Chase & Co. (JPM), Morgan Stanley (MS), Royal Bank of Scotland, UBS (UBS), Wells Fargo (WFC) and Goldman Sachs (GS).

HSBC’s (HSBA) outlook has been changed to negative, meaning a downgrade is possible.

Several of these banks can be found in financial ETFs, including:

• iShares S&P Global Financial (IXG): down 56.2% year-to-date; Bank of America, 2.8%; Citigroup, 1.6%; HSBC, 4.6%; JP Morgan, 4%; Wells Fargo, 3.7%.

• Financial Select Sector SPDR (XLF): down 57.1% year-to-date; Bank of America, 9.6%; Citigroup, 5.9%; Goldman Sachs, 3.2%; JP Morgan, 12%; Wells Fargo, 8.9%.

Tags: Financial, IXG, XLF

Comments

[notsosmart:]

who can believe the crooked rating systems? just another bunch of selfserving groups among many.

2008 Dec 20 01:47 PM

[aware:]

Your right on.


On Dec 20 01:47 PM notsosmart wrote:

> who can believe the crooked rating systems? just another bunch of
> selfserving groups among many.

2008 Dec 20 05:55 PM

[Simply Put:]

If you think its time to get optomistic think again. The worst is still yet to come,. The rich are now feeling the heat and a new wave of negativity is going to hit like a tidal wave ala Madoff and more toxic assets on bank sheets and commercial mortgage defaults. It wont be a happ new year for long. Imagine after the bad news is all out, there will be no party. There will be a U shaped bottom that lasts at least a year if no more real bad news occurs. It will be like being trapped down a well without a ladder. Sure the only way out is up, but theres no way to get there. I advise taking off any rose colored glasses you may be clinging to and look the reality in the eye. This is not an "investors market" yet unless you want to trust your money to a black hole with no foreseeable exit. DO NOTHING, it might save you a LOT of money!

2008 Dec 20 08:37 PM

[Thomas Smic...:]

When mortgage rates hit 4.50%, DO SOMETHING.

2008 Dec 20 11:57 PM

[User 226404:]

Banks, bank ETFs are no risk investments any more with Government backing. Let bad dealings of the past run their course and the bank will come back big. Banking has always been a money making business untill and unless greedy management blow it.

This is the best time to bet big on bank EFTs.

S&P downgrades? What is S&P? S&P is a unless organisation which always act after events.

2008 Dec 21 10:13 AM

[pockyclips ...:]

Just as a rising tide allegedly lifts all boats, a tsunami will swamp them. We have just felt the earthquake; the tide has yet to come in.

2008 Dec 21 12:32 PM