Fitch indicated it may move to cut its credit rating on Merrill’s long-term debt

Merrill Lynch (MER) has garnered the nod as an outlier among investment banks in terms of credit worthiness. But it’s a dubious distinction, at best. Ratings agency Fitch indicated it may move to cut its credit rating on Merrill’s long-term debt - a prospect it basically erased for the other three major investment banks. Citing the scope of the long-term credit that comes due next year, Fitch placed Merrill’s long-term issuer default ratings on rating watch with a negative bias, a move that often presages an upcoming cut in the credit rating itself. Fitch expressed pessimism about the prospects for Merrill’s fixed-income, currency and commodity operations, which it said could off-set strength in areas like Merrill’s retail brokerage operations. The rating agency also said that it anticipated further write-downs from Merrill’s exposure to its residential mortgage and monoline insurance exposure, which diminish expectations for a sustainable return to core profitability. Merrill shares traded down nearly 3%, though - to be fair - even the investment banks that weren’t put on rating watch suffered declines in Wednesday’s trading.

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