Moody's: BofA, Wells Fargo not too big to fail
The New York-based ratings company dropped its credit grades on Bank of America Corp. and Wells Fargo & Co. on Wednesday. Moody's said "the downgrades result from a decrease in the probability that the U.S. government would support the bank, if needed," though don't reflect a weakening of the banks' credit quality.
Moody's cut BofA's rating two notches, to Baa1 from A2. The new rating still is investment grade. Wells was cut to A2 from A1.
For Brian Moynihan, the beleagured BofA chief executive, it's just another headache as the banking giant tries to shore up its balance sheet. BofA announced earlier this month that it would slash tens of thousands of jobs to cut costs. A lower credit rating ultimately will make it more expensive for the bank to borrow money.
Investors reacted swiftly, sending BofA's already battered shares down nearly 6% to $6.51 in trading on the New York Stock Exchange.
The bank was quick to respond: "Moody’s decision to downgrade our credit rating is based on factors external to Bank of America: Their conclusion that the Dodd-Frank legislation will make the U.S. government less likely to support financial institutions in a crisis, and a possible further deterioration of the economy."
Wells Fargo's ratings weren't cut as severely, and shares clung to a slim gain in trading. The long-term rating of Citigroup Inc., also mentioned in the report, was upheld at A3.
--Joe Bel Bruno