NEW YORK, NY--(Marketwire -02/20/12)- Banking stocks worldwide continue to outperform the market this year despite a recent warning from Moody's that 114 major banks are under review for a possible downgrade. The Financial Select Sector SPDR Fund (XLF) -- which seeks to replicate an index comprised from diversified financial services; insurance; commercial banks; capital markets; real estate investment trusts (REITs); consumer finance; thrifts and mortgage finance; and real estate management and development -- is up more than 12 percent year-to-date as investors jump back into the sector after a major selloff in 2011. The Paragon Report examines investing opportunities in the Money Center Banking Industry and provides equity research on Bank of American Corporation (NYSE: BAC - News) and the Royal Bank of Scotland Group PLC (NYSE: RBS - News) (LSE: RBS - News). Access to the full company reports can be found at:
Last week Moody's said that it is concerned that banks with significant capital market activities are dealing with challenges such as widening credit spreads, delicate funding conditions and increased regulatory requirements and restrictions. The ratings agency said some of the risks facing banks have been mitigated by increased regulatory capital and liquidity requirements, but they have not gone away completely. "These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer-term profitability and growth prospects of these firms," Moody's said.
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The banks whose long-term ratings are under review for downgrade include Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase, the Royal Bank of Canada, Barclays, UBS, Credit Suisse, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings and Morgan Stanley.
According to Bloomberg the threat of downgrades hasn't deterred investors from buying financial debt. "The response is similar to that taken in August when financial markets dismissed the US loss of its AAA status at Standard & Poor's," Bloomberg reported. Lewis Wan, Hong Kong-based chief investment officer of Pride Investments Group Ltd, echoes that sentiment, arguing that "the downgrade is unlikely to shake the market a lot as this has been expected for quite some time."
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