MOODYS CONFIRMS RATINGS OF J.P. MORGAN & CO. INC (SENIOR AT A1); RATING OUTLOOK REMAINS STABLE
Moody's Investors Service confirmed the ratings of JP Morgan & Co. Incorporated, following the announcement that the company's Board of Directors approved a plan under which the company may repurchase up to $3 billion of its common stock. The rating outlook remains stable.
Moody's said that JP Morgan has reduced the risk of its credit portfolio, freeing up some economic capital. This reduction has been accomplished over the last 21 months by means of a roll-off of commitments, asset sales, credit derivative transactions, and collateralization. As a result, JP Morgan has achieved a permanent reduction in the amount of equity capital required to support its credit business.
Moody's also noted that the current rating incorporates the volatility associated with JP Morgan's large trading business.
The rating agency assumes that JP Morgan will implement the stock repurchase over the next 15 months, although the company may repurchase a significant amount of stock in the near term subject to market conditions. In Moody's view, a measured pace of share repurchases, offset to some extent by ongoing earnings, will allow JP Morgan to maintain a capital base that is appropriate for its reduced credit risk profile and current debt ratings.
Moody's views the share repurchase program as one of the tools available to JP Morgan in managing its economic capital base, as market conditions change and as new opportunities arise. Accordingly, share repurchases should be balanced, to some extent, with earnings generation, new investment opportunities, and issuance to employees, to ensure a reasonable cushion of economic capital throughout the buyback period.
The following ratings are confirmed:
J.P. Morgan & Co. Incorporated -- senior debt A1; subordinated debt A2 ; preferred stock "a1"; issuer rating A1.
Morgan Guaranty Trust Company of New York -- bank deposit rating Aa3 other senior obligation rating Aa3 ; senior debt Aa3; subordinated debt A1; issuer rating Aa3; bank financial strength rating B.
Morgan Guaranty Trust Company of New York, Paris Branch -- bank deposit rating Aa3
J.P. Morgan Australia Ltd. -- senior debt Aa3.
J.P. Morgan Index Funding Company, LLC -- preferred stock "aa3" .
JPM Capital Trust I -- preferred stock "a1"
JPM Capital Trust II- - preferred stock "a1"
JPM Capital Trust III -- preferred stock (P) "a1".
JPM Capital Trust IV -- preferred stock (P) "a1"
J.P. Morgan & Co. Incorporated -- Prime-1 for its commercial paper.
Morgan Guaranty Trust Company of New York -- Prime-1 for its bank deposit rating; Prime-1 for other senior obligations; Prime-1 for its commercial paper.
Morgan Guaranty Trust Company of New York, Paris Branch -- Prime-1for its bank deposit rating.
J.P. Morgan Australia Ltd. -- Prime-1for its commercial paper.
J.P. Morgan & Co. Incorporated is a bank holding company headquartered in New York, with total assets of $269 billion as of June 30, 1999.
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