The big banks have gone to considerable lengths to mend the weaknesses that they were in before, during and after the recession. The public perception of the big banks is not very highly regarded. Now the banks are apparently at risk of yet another credit rating downgrade. Late on Thursday came word out of Moody’s Investors Service that the credit ratings agency has placed the senior and subordinated debt ratings of the six largest U.S. bank holding companies on review “as it considers reducing its government (or systemic) support assumptions to reflect the impact of U.S. bank resolution policies.”

Moody’s signaled that the four on review for downgrade are Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), both of which are bank holding companies with no retail banking operations, as well as J.P. Morgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC).

Where the rating changes become a wild card are in Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C). These two were placed on “review direction uncertain” as Moody’s “considers the potentially offsetting influence of improvements in the standalone credit strength of their main operating subsidiaries, the ratings on which were simultaneously placed on review for upgrade.”

Two additional banks with ratings previously placed on review for a credit rating downgrade also were included in the review: Bank of New York Mellon Corp. (NYSE: BK) and State Street Corp. (NYSE: STT).

Moody’s said:

The ratings on the bank-level subordinated debt of JP Morgan Chase Bank N.A. and Wells Fargo Bank N.A. were placed on review for downgrade, while those at Bank of America N.A. are on review direction uncertain. The bank-level subordinated debt ratings of The Bank of New York Mellon and State Street Bank and Trust, which were previously placed on review for downgrade, are also included in the review. There is no rated bank-level subordinated debt outstanding at Citibank N.A., Goldman Sachs Bank USA or Morgan Stanley Bank N.A. … Moody’s actions follow its March 2013 announcement that it would reassess its support assumptions for bank holding companies in the US and that it would consider whether to revise these assumptions by the end of the year.

The ratings placed on review for a downgrade were as follows:

• Goldman Sachs Group Inc. (A3 senior, Baa1 subordinated and Baa3 (hyb) trust preferred vehicles)
• J.P. Morgan Chase & Co. (A2 senior, A3 subordinated, Baa2 (hyb) trust preferred vehicles and Prime-1 short-term rating); J.P. Morgan Chase Bank N.A. (A1 subordinated)
• Morgan Stanley (Baa1 senior, Baa2 subordinated, Ba1 (hyb) trust preferred vehicles and Prime-2 short-term rating)
• Wells Fargo & Company Inc. (A2 senior, A3 subordinated, Baa1 (hyb) trust preferred vehicles and Prime-1 short-term rating); Wells Fargo Bank, N.A. (A1 subordinated and A3 (hyb) trust preferred vehicles)
• Bank of America Corp. (Prime-2 short-term rating)
• Citigroup, Inc. (Prime-2 short-term rating)

The following ratings continue to be on review for downgrade:

• The Bank of New York Mellon Corp. (Aa3 senior, A1 subordinated, A2 (hyb) trust preferred vehicles and Baa1 (hyb) noncumulative preferred); The Bank of New York Mellon (B bank financial strength rating (BFSR)/aa3 baseline credit assessment (BCA), Aa1 deposits and senior and (P)Aa2 subordinated)
• State Street Corp. (A3 (hyb) trust preferred vehicles and Baa1 (hyb) noncumulative preferred); State Street Bank and Trust Co. (B BFSR/aa3 BCA, Aa2 deposits and senior and Aa3 subordinated)

The following ratings were placed on review for upgrade:

• Bank of America, N.A. (D+ BFSR/baa3 BCA, A3/Prime-2 deposits and senior); Bank of America Corp. (B1 (hyb) noncumulative preferred)
• Citibank, N.A. (D+ BFSR/baa3 BCA, A3/Prime-2 deposits and senior); Citigroup Inc. (B1 (hyb) noncumulative preferred)

The following ratings were placed on review direction uncertain:

• Bank of America Corp. (Baa2 senior, Baa3 subordinated and Ba2 (hyb) trust preferred vehicles); Bank of America, N.A. (Baa1 subordinated)
• Citigroup Inc. (Baa2 senior, Baa3 subordinated and Ba2 (hyb) trust preferred vehicles)
• State Street Corp. (A1 senior, A2 subordinated)

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