Investment Gems

Moody’s has announced lower ratings for 15 Global Banks. On the bright side is JP Morgan which is one of the most praised banks on Moody’s report. On the other hand banks like Bank of America and Royal Bank of Scotland are among the riskier banks.

This confirms what I had written on the European Jewels – Banco Santander (EJ-BS), in this guide for investments in banking I had suggested that JP Morgan was one of the best banks in the world, and that BoA and RBS were banks to avoid. Therefore, until now my investment guide is completely accurate. But there is more.

“LONDON, June 22 (Reuters) – Downgrades by ratings agency Moody’s will make funding more expensive for banks that rely the most on capital markets, while reinforcing the competitive advantage of “safe haven” banks that can fund themselves from stable customer deposits.”

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But over the medium term, the downgrades will reinforce a trend that has seen weaker banks punished for their risk taking, while stronger banks are rewarded for conservative funding models, ensuring lower costs and higher margins”

If you read EJ-BS you will notice that this is the confirmation of what we have stated. The conservative banks, through solidity will achieve a status of Safe-Haven banks which will allow them to have important cost advantages.

The main Santander problem is only its location (Spain), however, other analysts are now starting to look with other eyes to Spanish assets, some call them “oversold.” It might just be that European Jewels is the best friend of investors coming out of this storm.