UBS Rating Cut, Fitch Says More Than Dozen Banks May Follow

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UBS Rating Cut, Fitch Says More Than Dozen Banks May Follow

Oct. 14 (Bloomberg) -- UBS AG, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc had long-term issuer default grades cut by Fitch Ratings, which put more than a dozen other lenders on watch negative as part of a global review.

UBS's long-term issuer default rating and its “support rating floor” were cut to A from A+ on a “view that the one- notch uplift for close affiliation with the Swiss state is no longer warranted,” the ratings firm said yesterday in a statement. Lloyds and RBS were lowered two steps to A from AA- as Fitch said the U.K. is less likely to provide future support.

Fitch also placed viability ratings, and in some cases credit grades, on negative watch for seven global banks including Goldman Sachs Group Inc. and Morgan Stanley because of new regulations and economic developments. It put European banks such as Credit Agricole SA on watch, based on sovereign debt concerns and said it would review Bank of America Corp.'s mortgage-litigation risks.

“Fitch systematically, like many of the rating agencies, seems to be working its way through the European banking community from the standpoint of raising awareness of potential capital inadequacies,” Adrian Miller, a New York-based fixed income strategist at Miller Tabak Roberts Securities LLC, said in a telephone interview. “This is more or less a macro call on the sector. It's a continuation of a developing theme that's been going on since July that, since that point, has intermittently sent shockwaves throughout the market.”

Spain Downgraded

The euro weakened against the dollar and yen after Standard & Poor's cut Spain's credit rating, highlighting concern that rising defaults will threaten efforts to stem Europe's sovereign-debt crisis. Spain's long-term sovereign debt was downgraded to AA- from AA, making it the third cut in three years by S&P.

The seven global banks placed on watch by Fitch include Deutsche Bank AG, Credit Suisse AG, BNP Paribas SA, Societe Generale SA and Barclays Plc.