BofA, Citi Hit by Fitch Downgrades

Updated from 2:22 p.m. EST

Fitch Ratings on Friday downgraded Bank of America's (BAC Quote) and Citigroup's (C Quote) individual ratings and preferred shares to junk status, as the banks face increasing pressure from mounting losses and the souring economy.

BofA and Citi, each of whom have sold $45 billion preferred equity stakes to the Treasury Department through the Troubled Asset Relief Program and had billions more in illiquid assets guaranteed by the federal government, could just be the first in a string of downgrades from the ratings agency, as it applies new criteria for evaluating banks in receipt of bailout funds.

A report issued by Fitch on Wednesday says that risk of deferral on preferred stock has greatly increased as a result of the current crisis. The report refers to capital infusions in the banks over recent quarters that have provided a buffer against weakened earnings. ...