Moody’s Shifts Ratings: US Banks Brace for Turbulence
The credit ratings of three major US banks—JPMorgan Chase, Wells Fargo, and Bank of America—were recently revised by Moody’s Investor Service, shifting from a stable outlook to a "negative" rating.
Moody’s attributed this change to concerns about the US government’s potentially reduced ability (Aaa negative) to support these critical financial institutions.
Moody’s specifically highlighted JPMorgan’s complex capital markets operations, which could pose substantial risks to its creditors, contributing to its downgrade.
The agency suggested that a potential upgrade for JPMorgan would hinge on maintaining robust performance and capital levels surpassing its peers.
Despite these downgrades, the stock prices of all three banks have shown positive trends for November. Moody’s emphasized that this rating adjustment for the banks aligns with a prior downgrade of the US sovereign credit rating, also moving from stable to negative.
In a recent research note, Moody’s expressed concerns about US banks facing significant risks related to deposit flight due to interest rate fluctuations and asset-liability management challenges.
Moreover, the agency, which holds a dominant position in global ratings alongside Standard & Poor’s (S&P), predicted a mild recession for the US economy in early 2024. They anticipate tightened credit conditions and increased loan losses for US banks due to funding strains within the sector.