Fitch Inc. reduced State Street Corp.'s preferred stock rating but affirmed other key ratings, citing "the extremely high probability" the federal government would bail out the asset manager and securities custodian if necessary.
State Street last month shocked analysts and investors by disclosing that unrealized losses had more than doubled in the fourth quarter, raising questions about its capital levels and ability to raise money if need be.
All three major ratings agencies, including Fitch, downgraded the company's main ratings in response to the fourth-quarter results.
On Monday, Fitch cut its rating on the preferred stock by two notches, to BBB, or two steps above a junk grade, on the "somewhat higher risk" that dividends could be deferred or that "other undesirable outcomes" were possible.
Still, the ratings firm called State Street's near-term plan to rebuild capital — announced last week — a positive and put a stable outlook on all State Street's ratings.
The Boston company said last week it would slash its dividend to 1 cent a share, cut bonuses, and take other cost-cutting steps to boost its tangible common equity ratio.
On Monday, State Street's shares closed up 0.13%, to $30. 33. The company's shares are down roughly 60% since September.