Major U.S. Banks, Including JPMorgan, at Risk of Credit Rating Downgrades

Fitch Ratings has signaled a potential risk of sweeping rating downgrades for dozens of U.S. banks, including major institutions like JPMorgan Chase, following a one-notch downgrade of the industry’s overall score to AA- in June. Analyst Chris Wolfe warned that another downgrade to A+ would necessitate reevaluating ratings for over 70 U.S. banks, possibly leading to negative rating actions. This comes amid turbulent actions by credit rating firms, such as Moody's downgrading 10 smaller banks and issuing warnings for 17 more, including larger banks like Truist and U.S. Bank. Factors that could prompt Fitch to downgrade the industry further include interest rate changes by the Federal Reserve and rising loan defaults beyond historically normal levels. The impact of widespread downgrades is uncertain, but it could lead to higher bond costs, compressed profit margins, and difficulties accessing debt markets for affected banks.