JPMorgan Down 2.6% After Fitch Warns Downgrade Could Be Coming

Credit rating agency Fitch said Wall Street banks, including JPMorgan, face potential downgrades if the industry’s operating environment continues to deteriorate. JPMorgan’s stock fell 2.6% on the reports to $150.64 per share, with other lenders seeing similar price movements.

Fitch to Reasses Bank Ratings in Case of Further Operating Environment Downgrades

Shares of Wall Street giant JPMorgan fell more than 2.6% at the market open on Tuesday after Fitch Ratings issued a warning that some US banks could be downgraded if the credit rating agency further reduces its evaluation of the operating environment for the sector. JPMorgan was named among those banks facing downgrade risks.

Earlier this year, Fitch trimmed the rating of the US banking industry’s operating environment from AA to AA- due to pressure on the country’s credit rating, regulatory issues, and uncertainty about the Federal Reserve’s monetary policy.

If the agency were to make another downgrade to A+ from AA-, it would force the firm to reassess ratings on each of the over 70 US banks it covers, analyst Chrise Wolfie told CNBC. 

“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.

– said Fitch Ratings analyst Chris Wolfe.

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Moody’s Downgraded Ten Small and Mid-Sized Banks

Fitch’s warnings come just a week after another major credit rating agency, Moody’s, downgraded 10 small and mid-sized banks and warned that similar demotions could be imposed for seventeen other lenders.

Meanwhile, Fitch also downgraded the US long-term credit rating at the start of August, citing political dysfunction and rising debt loads. The move was fiercely criticized by several business leaders, including JPMorgan CEO Jamie Dimon, given the resolution of the debt ceiling crisis two months ago.

Fitch, one of the top 3 credit rating agencies, slashed the US credit grade from AAA to AA+ – a downgrade that last happened more than 10 years ago. Fitch said tax cuts, spending programs, and numerous economic headwinds have resulted in growing budget deficits, while mid-term challenges tied to entitlement expenses remain overlooked. 

Shares of other Wall Street banks also opened lower on Tuesday, with Bank of America, Truist Financial Corporation, and HSBC Holdings tumbling 2.23%, 3.16%, and 2.64%, respectively. 

Do you think bank stocks could face significant risks if Fitch goes on to downgrade the industry? Let us know in the comments below.