UH OH...S&P BULLETIN: Morgan Chase Liquidity Concerns Unfounded
NEW YORK, July 24 /PRNewswire/ -- Standard & Poor's Ratings Services said today that it believes market concerns about the liquidity position of J.P. Morgan Chase & Co. (JPM, rated AA-/Negative/A-1+), evidenced by steep declines in its stock price and rumors, to be unfounded. JPM is not currently having any difficulties meeting obligations or accessing capital markets. Cash and liquid assets at the holding company exceed the amount of debt maturing over 12 months (including $14.9 billion of CP and $6.6 billion of term debt) by $1 billion. In addition, the bank subsidiaries have more than $2 billion of dividending capacity. There are no stock price triggers in any debt covenants that would accelerate the need for funds. The markets appear to be fearful about the firm's solvency if current lawsuits and Congressional investigations take a negative turn.
However, even if JPM were to lose its case on the $1.1 billion of surety bonds, the losses would be covered by earnings, which should surpass $4 billion for the year. As to other allegations, there is no way to responsibly quantify what the impact, if any, might be. In any case, the $37 billion tangible equity base should provide considerable comfort against any such event risk. However, the negative outlook on the holding company's 'AA-' rating continues to indicate the possibility of a rating adjustment in response to a deteriorating business environment that affects all universal banks and brokers. Commercial loan quality should also remain a concern through year end, although the consumer sector is improving.
SOURCE: Standard & Poor's |
