An analyst at Fitch Ratings on Tuesday (August 15) has warned that it may be forced to downgrade dozens of banks, including JPMorgan Chase, a report from CNBC said.
The ratings agency cut its assessment of the industry's health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks.
But another one-notch downgrade of the industry’s score, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 US banks it covers, Wolfe told CNBC in an exclusive interview at the firm’s New York headquarters.
"If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions," Wolfe said. This time, Fitch is intent on signaling to the market that bank downgrades, while not a foregone conclusion, are a real risk, said Wolfe to CNBC.
The firm's June action took the industry’s “operating environment” score to AA- from AA because of pressure on the country’s credit rating, regulatory gaps exposed by the March regional bank failures and uncertainty around interest rates.
The problem created by another downgrade to A+ is that the industry’s score would then be lower than some of its top-rated lenders.
The country’s two largest banks by assets, JPMorgan and Bank of America, would likely be cut to A+ from AA- in this scenario, since banks can’t be rated higher than the environment in which they operate, CNBC reported.
First Published: Aug 15, 2023 6:46 PM IST
