Moody's cuts JPMorgan ratings one notch to "Aa3"

NEW YORK Thu Jan 15, 2009 3:47pm GMT

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NEW YORK Jan 15 (Reuters) - Moody's Investors Service cut the debt ratings of JPMorgan Chase & Co (JPM.N) by one notch on Thursday, citing potential losses over the next 15 months.

Moody's cut the bank's ratings by one level to "Aa3," the fourth-highest rating, and said the rating outlook is stable.

"The downgrades are in response to the poor prospect of JPM generating capital in the current recession and protracted period of market illiquidity leading to possible losses," Moody's said.

Consecutive quarterly losses in the next 12 to 15 months is possible, the rating agency said, due to potential revenue declines from a slowing economy. JPMorgan also faces higher charges against its $302 billion residential-mortgage portfolio than Moody's expected in September.

Moreover, it faces the likelihood of increased credit costs against its $185 billion credit-card portfolio, Moody's said.

Moody's placed a stable outlook on the bank's ratings as JPMorgan maintains "prudent capital ratios, a sizable loan-loss reserve, and enviable franchise positions in its major businesses," Moody's said.

JPMorgan "is in a more manageable position than are its major U.S. bank competitors to deal with the dual problems of revenue reductions and increased credit costs," Moody's analyst Sean Jones said in a statement. "To the extent these pressures become more extreme, we expect JPM would defend its capital ratios by reducing expenses and by cutting its common dividend." (Reporting by Walden Siew; Editing by James Dalgleish)

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