Fitch may cut ratings for Morgan Stanley, Goldman

October 13, 2011 - 5:30 PM

NEW YORK (AP) — Fitch Ratings says it is reviewing its ratings for Morgan Stanley, Goldman Sachs Group Inc. and five European banks, and may downgrade all of them.

The agency placed a host of ratings for the two U.S. investment banks and their European counterparts on "ratings watch negative," and says it expects to resolve that status soon.

The review reflects Fitch's concerns about increased challenges in the financial markets, resulting from both economic developments, particularly in Europe, and a myriad of regulatory changes.

For Morgan Stanley, Fitch says it is concerned about the firm's business-model shifts, intended to reduce volatility from traditional investment banking and generate more stable fee income through wealth management services.

For Goldman, the concerns are based on its wholesale funding profile and its reliance on trading revenue.