Fitch Ratings downgraded seven of the largest U.S. and European banks on Thursday citing "increased challenges" in the financial markets.
Fitch cut long-term ratings on Barclays and Credit Suisse by two notches to A from AA-.
Bank of America, BNP Paribas, Citigroup, Deutsche Bank and Goldman Sachs were all cut by one notch, or one third of a letter rating.
Fitch affirmed its long-term A ratings on JPMorgan Chase & Co, Morgan Stanley and UBS AG, as well as its A+ rating on Societe Generale.
Fitch Ratings may only be the third-largest rating agency behind Standard & Poor and Moody's, but the addition of their downgrades emphasizes others made at the end of last month. Some of those names had been clinging to their last AAA from Fitch.
Bank of America has been downgraded by all three agencies.
Fitch said the U.S. and European banks "are particularly sensitive to the increased challenges the financial markets face."
The downgrades "reflected challenges faced by the sector as a whole, rather than negative developments in idiosyncratic fundamental creditworthiness," Fitch said (via BBC).
In a separate announcement about the downgrade of Citigroup, Fitch cited "policy momentum" against using taxpayer money to support banks during a crisis.
So, we're wondering, are there any financial stocks being targeted by bearish investors?
For ideas, we collected data on short-seller trends, and identified a list of megacap financial stocks that have seen a sharp increase in shares shorted over the last month (i.e., an increase in bets that these stocks will decline).
This is significant, especially when you consider that short-sellers tend to be more sophisticated investors (because they require strict credit approval to perform these trades). So if these investors are turning bearish on a stock, it's worth paying attention to.
Short-sellers think these financial stocks are in trouble -- do you agree?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Banco Santander-Chile
2. Taubman Centers
3. Piedmont Office Realty Trust
5. Old Republic International
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
List compiled by Eben Esterhuizen, CFA. Kapitall's Rebecca Lipman and Eben Esterhuizen do not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.
The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Alleghany and The Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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