Well this isn't good Moody’s has put the credit ratings of six large US banks, including Bank of New York Mellon, State Street and Northern Trust, under review for a possible downgrade, sending stocks tumbling as investors worried about more banking sector pain ahead.
The credit ratings agency said late Monday that its warning on the three banks reflected “ongoing strain” in the US banking sector, including increased pressures on funding and potential “weaknesses” in the amount of capital lenders are required to hold.
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BK has the 6 big Cdn banks in its portfolio accounting for about 70% of assets. BK has about 15% cash and another 15% invested in the 5 biggest investment banks in the US (props to EdP for the update).
The threat by Moody's to downgrade the large invest banks shouldn't be a surprise to anyone and as I mentioned before, has likely already been baked into share prices for the most part.
Let's say the market smacks the US investment banks by 10% on the news. I don't think it will happen, but what do I know? Ten percent of 15% equates to a downward move in Unit NAV of BK of about 1.5% or $0.20. I don't see the Cdn banks getting torched on the news but who knows.
Not a big deal IMO, but the market typically runs on emotion until clearer heads prevail so we might see a bit of a run on the NAV this week. I hope so as I'm still buying as the banks ALWAYS find ways around rule changes or to use the rule changes in their favour. .