Reply #72: U.S. Bank Credit Risk Climbs After Goldman Sachs Loss Exceeds Estimates

[Demeter]

http://www.bloomberg.com/news/2011-10-18/u-s-company-credit-risk-gauge-climbs-to-one-week-high-on-europe-crisis.html

Credit-default swaps on U.S. banks climbed on concern that the slowing economy was weighing on financial institutions’ balance sheets after Goldman Sachs Group Inc. (GS) reported its second quarterly loss in 12 years.

Contracts protecting the debt of the New York-based company increased 6 basis points to a mid-price of 375 basis points at 9:45 a.m. in New York, according to broker Phoenix Partners Group. Contracts on Bank of America Corp. (BAC) climbed 23.5 basis points to 413.5 as of 8 a.m., according to data provider CMA.

“Market concern over the continued impact of a slow economic recovery is intensifying pressure on BofA and Goldman,” Diana Allmendinger, research director at Fitch Solutions in New York, said in a statement. In the past three months, swaps on Bank of America have widened more than 100 percent and those on Goldman Sachs 126 percent, according to Fitch.

Investors pushed bank credit swaps higher after Goldman Sachs reported a third-quarter loss of $393 million, or 84 cents per share, compared with a profit of $1.9 billion, or $2.98, a year earlier, and Charlotte, North Carolina-based Bank of America had net income of $6.23 billion, or 56 cents a diluted share, skewed by one-time pretax gains including $4.5 billion in fair-value adjustments of structured liabilities and $1.7 billion tied to changes in value of the company’s debt. MORE...