Moody’s Issues Negative Ratings Outlook for JPMorgan Chase, Wells Fargo, and BofA Due to Weakened US Government Support for Big Banks

Moody’s Issues Negative Ratings Outlook for JPMorgan Chase, Wells Fargo, and BofA Due to Weakened US Government Support for Big Banks

Three Leading United States 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 United States Government to facilitate systemically important banks, according to analyst Peter E. Nerby of Moody’s.

JPMorgan’s downgrade was due to its “complex” financial resources markets business, which poses whole lot of dangers to its creditors. Moody’s states that for JPMorgan to see an upgrade, it would need to sustain strong and stable performance and financial resources levels over its competitors.

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Regardless of the downgrade, all 3 banks’ stock prices have seen an increase for November. Moody’s likewise related the downgrade to a previous downgrade of the United States sovereign credit rating from stable to negative.

Fall Forecast by Moody’s for the United States Economy

Last quarter, Moody’s released a research note predicting a probable mild fall in early 2024 due to the funding strains on the United States banking sector. The agency anticipates that this situation may lead to a tightening of credit conditions and increased loan losses for United States banks.

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Hot Take

Moody’s downgrade of 3 major United States banks reflects concerns about the United States government’s capacity to facilitate them. Additionally, the agency is forecasting a mild fall for the United States economy in the near future, potentially impacting the banks’ credit conditions and loan losses.

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