Reuters is reporting that a major brokerage, CIBC World Markets, downgraded Citibank and Bank of America based on concerns regarding their revenue outlooks.
A CIBC World Markets analyst downgraded Citigroup to “sector underperformer,” citing capital concerns for the biggest U.S. bank. The CIBC analyst wrote she expects Citi to be forced to sell assets, raise capital or cut its dividend to improve its capital ratios.
CIBC also downgraded Bank of America (BAC.N), saying it sees a diminished revenue outlook for the bank. In addition, Credit Suisse cut its rating for Citigroup.
“Let’s face it, we got a pretty big downgrade on the banks by CIBC. We know there’s more to come there,” said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.
The problems in the markets are starting to spread, almost like a snowball effect. Was the Fed’s recent rate-cut decision a smart move? The mess in mortgage and credit markets was caused by too much easy money, so the Fed’s solution is to make more easy money?