Three Leading US Banks Downgraded by Moody’s to “Negative” Outlook
Moody’s Investor Service has downgraded JPMorgan Chase, Wells Fargo, and Bank of America to negative ratings, previously classifying them as stable. The main reason behind this move is the potentially weaker capacity of the US government to support systemically important banks, according to analyst Peter E. Nerby of Moody’s.
JPMorgan’s downgrade was due to its “complex” capital markets business, which poses significant risks to its creditors. Moody’s states that for JPMorgan to see an upgrade, it would need to maintain strong and stable performance and capital levels above its competitors.
Despite the downgrade, all three banks’ stock prices have seen an increase for November. Moody’s also related the downgrade to a previous downgrade of the US sovereign credit rating from stable to negative.
Recession Forecast by Moody’s for the US Economy
Last quarter, Moody’s released a research note predicting a potential mild recession in early 2024 due to the funding strains on the US banking sector. The agency anticipates that this situation may lead to a tightening of credit conditions and increased loan losses for US banks.
Hot Take
Moody’s downgrade of three major US banks reflects concerns about the US government’s capacity to support them. In addition, the agency is forecasting a mild recession for the US economy in the near future, potentially impacting the banks’ credit conditions and loan losses.
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