[ by Howard Haykin ] Citigroup, the lender whose credit rating was cut by Moody’s Investors Service to its lowest level since its 1998 creation (from the merger of Citicorp and Travelers Group), led Wall Street banks in dismissing downgrades and urged investors to seek alternative analyses.  Citi laced into Moody’s, which cut Citi's ratings 2 grades, calling the action unwarranted, arbitrary and failed to recognize the lender’s financial strength.  It its statement, the New York-based bank further said that investors should not rely on “opaque” credit ratings.

“Moody’s approach is backward-looking and fails to recognize Citi’s transformation over the past several years.” Citi believes that investors and clients have become much more sophisticated in their credit analysis over the past few years, and that few rely on ratings alone - particularly from a single agency - to make their credit decisions.”  - Citigroup Statement.

‘Risk Profile’. Edinburgh-based RBS released a statement that also protested the action by Moody’s, stating that it “does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile."  RBS added, “The impacts of this downgrade are manageable.” Moody’s lowered Citigroup and Charlotte, NC-based Bank of America to Baa2, 2 levels above junk. The ratings firm also reduced the Citibank NA bank subsidiary by two grades. The cuts could result in “cash obligations and collateral requirements” of $1.1 billion as of the end of March, the lender said in a quarterly filing. Citi and BofA both took $45 billion bailouts from U.S. taxpayers, which the banks have since repaid.  Bank of America, led by CEO Brian Moynihan, issued a statement saying that the bank has “significant liquidity and resources to serve clients and customers as we have transformed the company.” RBS, whose credit ratings were reduced by one grade to Baa1, received the biggest bailout of any lender during the financial crisis and currently is 64%-owned by U.K. taxpayers. ‘Somewhat Stunning’. After the 2-grade rating cut for Morgan Stanley, CEO James Gorman said that had Moody's carried out its threat to cut his bank's rating by 3 grades, as Moody's had forewarned, would have been “somewhat stunning.”  Even though Morgan Stanley avoided the 3-grade cut, Gorman said that the bank believes the ratings still do not fully reflect the key strategic actions we have taken in recent years.  “With our de-risked balance sheet, stable sources of funding, diverse business mix and strong leadership team, we are well positioned to deliver for clients and shareholders.” Under Pandit, Citigroup faces challenges in “instilling a risk culture” that reduces volatile results, in part because the bank is under pressure to return capital to shareholders, Moody’s said. Citigroup said that suggestion was “simply without merit.” “Investors and clients should make their own decisions,” the bank said. “Citi is aware that analytical alternatives to the ratings agencies exist today from several providers that would further enhance the ability of investors and clients to arrive at their own conclusions without being captive to the judgments of rating agencies.” For further details, go to:   [Bloomberg, 6/22/12].