Moody's shares fall amid rating agency legal fears

Moody's Corp.

Last Updated at 17 Nov 2017, 21:02 GMT *Chart shows local time Moody's Corp. intraday chart
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Shares in the US credit rating agency Moody's fell 7.7% in trading in New York on Friday amid fears of legal action surrounding rating agencies.

Moody's shares have now fallen more than 20% since Monday, when it was revealed rival agency Standard & Poor's was being sued by the US government.

Moody's chief executive said he had no knowledge of any impending lawsuits.

The share price fall comes despite Moody's reporting a 66% jump in net profit for the last quarter of 2012.

Net profit rose to $160.1m for the quarter, from $96.2m a year earlier.

The company also said it expected results to be strong in 2013 despite "ongoing economic uncertainty".

But the positive news was overshadowed by concerns that the US Department of Justice's actions against S&P could spread to other agencies.

Three firms - S&P, Moody's and Fitch Ratings - dominate the credit ratings industry, which involves rating assets by risk for the benefit of investors.

S&P is being sued over ratings it gave to some mortgage-backed assets in the run-up to the global financial crisis in 2007, which subsequently fell dramatically in value.

So far, Moody's has only faced legal action from private investors, including Abu Dhabi Commercial Bank, over losses related to the financial crisis.

But fears of wider legal action continue to weigh down share prices, investors say.

"If the question has become when, and not if, a lawsuit will be filed against Moody's, then the shares are simply unbuyable, in our view," an analyst at US investment firm BTIG, Mark Palmer, told Reuters.

Moody's chief executive Ray McDaniel told analysts he had no knowledge of "any impending complaint from the Department of Justice raising similar claims against Moody's [as those against S&P]".

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