Moody's cuts credit ratings of 15 major banks including RBC, Bank of America | iNFOnews | Thompson-Okanagan's News Source

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Moody's cuts credit ratings of 15 major banks including RBC, Bank of America

TORONTO - Moody's Investors Service has cut the credit ratings of some of the world's largest banks, including the Royal Bank (TSX:RY), Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs.

The ratings agency said Thursday that the banks were downgraded because their long-term prospects for profitability and growth are shrinking.

The ratings agency said it was especially concerned about banks with significant capital market activities during a time of increased volatility in markets.

A downgrade usually means that it becomes more costly for banks to raise money by selling debt. Investors demand higher interest for riskier debt, which is what the downgrades represent.

The Royal Bank said the downgrade will not affect its clients and will have a minimal impact on its business.

"RBC remains one of the strongest and highest rated banks in the world. That category crosses a number of classifications in terms of credit ratings, in terms of capital base and in terms of balance sheet," the bank said in a statement.

Moody's placed the Royal Bank as well as several other big name banks including under review earlier this year.

The review followed a move by Moody's to downgrade Royal Bank to Aa1 from Aaa in December 2010 due to the bank's capital markets exposure.

Royal Bank earned a first-quarter profit of $1.86 billion, or $1.21 per share, compared with $1.95 billion or $1.27 per share.

The bank said profits were down as business growth in Canadian Banking and Insurance, and stable credit quality were offset by lower earnings in its capital markets operations.

Its international and wealth management operations also suffered.

Royal Bank is the country's largest bank by assets and market capitalization, and has 77,000 employees serving more than 18 million clients.

The bank has operations across North America and 52 other countries.

News from © The Canadian Press, 2012
The Canadian Press

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