Downgrades on Bank of America and Wells Fargo

The big news yesterday outside the economic numbers was a downgrade on Wells Fargo and BoA. Both were expected and the senior-debt rating for Charlotte, North Carolina-based Bank of America was reduced to A2 from A1, according to a statement by Moody’s. San Francisco-based Wells Fargo had its senior-debt rating cut to A1 from Aa3. Both banks have accepted capital and guarantees from the Treasury valued at $163 billion for BoA, including aid to its units; and $25 billion for Wells Fargo, which they followed up and sold $12.6 billion in stock to the public the following month.
Bank of America stock has plunged by about two-thirds since the lender raised $10 billion selling shares for $22 each in October. It advanced 48 cents yesterday to $7.70. Wells Fargo rose 92 cents, or 5.9 percent, to $16.42. The senior subordinated debt rating for Bank of America was cut to A3 from A2, and the junior subordinated debt rating was downgraded to Baa3 from A2, The preferred stock rating is now at junk-level B3. Senior subordinated debt was reduced to A2 from A1 for Wells Fargo, Moody’s said today in a statement. The preferred stock rating was cut to B2 from A2. The bank's bonds in the 5-year sector tightened by 5-7bp yesterday.