Barclays, Credit Suisse, Deutsche Bank Ratings Cut by S&P

Barclays, Deutsche Bank and Credit Suisse Group AG had their credit ratings lowered by Standard & Poor’s as new rules and “uncertain market conditions” threaten their business.

Long-term counterparty credit ratings for the three banks were cut to A from A+, S&P said yesterday in a statement. The company also affirmed its A long-term rating and A-1 short-term rating on UBS AG, according to the statement. The outlook for all four companies is stable.

Banks are still in recovery from the 2008 financial crisis, which drove some economies into recession and spawned new regulations and legal probes. The four European lenders are among the most exposed to proposed rules that could reduce revenue from trading and investment banking operations, the ratings firm said.

“We consider that these banks’ debtholders face 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,” S&P said. “A large number of global regulatory initiatives are increasingly demanding for capital market operations.” Read more >>

Banks face billions more in Libor losses

Banks implicated in the Libor-fixing scandal will likely take billions more in losses as a result of pending litigation and regulatory penalties, according to industry analysts at Morgan Stanley. The analysis -- which the authors admit is crude -- is based in part on the experience of Barclays, the British bank which admitted that its staffers attempted to manipulate the London Interbank Offered Rate.

Many of the world's major banks, including Deutsche Bank (DB), Royal Bank of Scotland (RBS), Credit Suisse (CS), Citigroup (C, Fortune 500), UBS (UBS) and JPMorgan Chase (JPM, Fortune 500) have disclosed that they are being investigated.

Barclays has agreed to pay $453 million to U.S. and U.K. regulators, a settlement which provided the basis for Morgan Stanley's calculation that at least ten additional banks could be fined between $420 and $651 million by regulators. Other banks implicated in the scandal -- but not included in the Morgan Stanley analysis -- could also face penalties.

Banks that have not yet settled with regulators will likely pay a premium, as Barclays received preferential treatment from regulators because it was cooperative and settled quickly. The other banks, according to the analysis, should expect to pay 30% more. Under another scenario, the banks could face even higher fines after the U.K. Serious Fraud Office completes its investigation. Read more >>

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Investment Banks Caused, and Are Profiting From, Rising Food Prices

Image via WikipediaForeign Policy has a must-read story about the role that Goldman Sachs has played in driving up food prices globally. The story starts back in 1991, when Goldman planted the seeds of a trend that other institutions would follow, to the detriment of anyone who relies on eating food.
Or at least, anyone who eats who doesn't also have endless supplies of money.
The World Development Movement (a British organization) recently launched a campaign targeting Barclay's for its role in also profiting from higher food prices, as one of the three biggest players in the commodities markets (alongside Goldman and Morgan Stanley).
The Ecologist explains the World Development Movement's analysis of Barclays' involvement in food speculation:

Barclays could be generating as much as £340 million a year through gambling on the price of key commodity crops like coffee, sugar and wheat, the Ecologist has learnt. By creating funds to allow investors to speculate on the price of food, in the same way they would invest in the shares of a company, Barclays and others are able to bet on the price of food. However, food commodity trading is leading to higher and more volatile prices, say campaigners, which affect poor families in the less industrialised world the hardest as they can't afford basic foods and also make it more difficult for farmers to plan and invest. More...

Shadow inventory sales for years to come

Image by Getty Images via Daylife

Shadow inventory sales for years to come – 1.6 million distress sales in 2010, 1.6 million in 2011, and 1.5 million in 2012. By summer of 2011 REO pipeline will rise to 536,000.

Wall Street as usual enjoys denying facts until they become so obvious to the common person on the street. By then, it is too late to react. For example, subprime wasn’t a problem until it lit the fuse that set the global economy into a downward tailspin. Analysts at Barclays Capital are now coming out giving full attention to shadow inventory in the markets. Even though their report states that the pipeline for shadow inventory may be topping out, we have such a large number of distress properties in the pipeline that we won’t see any draw down of distress sales until 2012. And ultimately the sales end is what keeps prices lower because distress properties sell for less. As we know from various reports over 7 million homes are currently 30+ days late or in a state of foreclosure. The new data from Barclays looks at severe distress: More...