Bank of America and Citigroup Shares Fall as Concerns Grow Over Barclays' Interest Rate Fixing
July 06 2012 - 8:20AM
Marketwired
Shares of the major banks fell Thursday as concerns regarding the
London interbank offered rate (LIBOR) scandal spread. "The two-year
investigation into banks rigging Libor, which has taken a toll on
Barclays, has the potential to hurt Citigroup, JPMorgan and Bank of
America," Mike Mayo, an analyst at CLSA Ltd., wrote in a recent
research note. Five Star Equities examines the outlook for
companies in the Banking Industry and provides equity research on
Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C).
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Shares of Barclays plunged a day after the bank was ordered to
pay a $451.4 million regulatory fine for attempting to rig
benchmark interest rates. Bank of America, Citigroup and JPMorgan
are among the banks currently being investigated by regulators from
the U.S. and the U.K.
"They're facing the possibility of large civil suits, and
there's a great debate right now over whether these banks have
reserves for litigation," said Nancy Bush, bank analyst and
contributing editor to SNL Financial. "This is just one more issue
they really didn't need."
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Bank of America is one of the world's largest financial
institutions, serving individual consumers, small- and
middle-market businesses and large corporations with a full range
of banking, investing, asset management and other financial and
risk management products and services. Moody's Investors Service
recently reduced the banks rating one notch to BAA2 from BAA1.
"Citi strongly disagrees with Moody's analysis of the banking
industry and firmly believes its downgrade of Citi is arbitrary and
completely unwarranted. Moody's approach is backward-looking and
fails to recognize Citi's transformation over the past several
years, the strength and diversity of Citi's franchise, and the
substantial improvements in Citi's risk management, capital levels
and liquidity," Citigroup said in statement in response to Moody's
downgrade. Citigroup's rating was downgraded two notches to BAA2
from A3.
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