Wednesday, February 10, 2010

S&P cuts outlook on Citigroup, Bank of America

NEW YORK — Standard & Poor's Ratings Services on Tuesday cut its outlook on Citigroup Inc. and Bank of America Corp. to "negative" from "stable," saying bond holders could take a hit if the government steps in again to support banks.

The negative outlook signals the possibility of a future downgrade.

However, S&P affirmed the banks' investment-grade counterparty credit and debt ratings. S&P's counterparty credit ratings on Citigroup and Bank of America stand at A and A-1.

S&P defines an A rating as one given to a company that has a "strong capacity" to meet its debt payments over time but is more vulnerable to an economic downturn or a change in circumstances than companies that have the higher ratings of AAA or AA.

S&P credit analysts said the outlook revision on the banks "reflects our increased uncertainty about the U.S. government's willingness to provide additional extraordinary support to highly systemically important financial institutions in a way that will benefit debt holders."

S&P said sentiment in Congress regarding any future bailouts is changing, with a goal of reducing taxpayer exposure. The ratings agency cited a recently passed House bill that would penalize bond holders if taxpayer funds are used in company-specific bailouts.

(AP) read more here

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