Potential S&P Downgrades Of MBIA (MBI) and Ambac (ABK) Hammer Bank Stocks

Banking, finance, and taxes

Published: February 5, 2008 1:18 pm

Citigroup (NYSE: C) is trading off over 5% today. Wachovia (NYSE: WB) and JP Morgan (NYSE: JPM) are down over 3%.

Is it any wonder? S&P today said that its potential downgrade of Ambac (NYSE: ABK) and MBIA (NYSE: MBI) may lead to rating cuts at big banks as well. Bloomberg writes "bond insurer downgrades also could affect banks directly by causing them to recognize more losses and reverse gains in securities they hold guaranteed by the bond insurers, S&P said."

More downgrades at banks should drive their stock prices much lower. Citi bottomed at $22.36. Another downgrade might take it back there.

Douglas A. McIntyre

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