Bank of America Corp., Citigroup Inc. and Morgan Stanley could be downgraded next year, according to a report published Monday by Nomura Securities International Inc. It warned that downgrades could hurt their ability to operate in the commercial paper and repurchase markets.

"While it's not a done deal, at present Bank of America, Citi and Morgan Stanley appear most at risk of being downgraded to Tier 2 status" A-2,P-2 short-term ratings, according to analysts at Nomura. They said that a downgrade to A-2 affects "the ability to issue commercial paper" and "the ability to conduct repo with rating-sensitive counterparties."

According to the analysts, B of A, Citi and Morgan Stanley's balance sheets are in better shape but risks linger related to mortgage put-backs, European sovereign risk and shrinking balance sheets as well as contracting net interest margins. At the same time, regulatory changes threaten revenues. "We think a downgrade will ultimately drive up funding costs and make it more difficult to compete in certain businesses, but we don't think it will cause a meaningful loss of funding capacity," the report said.

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