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By Dan Freed
Oct 4 Fitch Ratings cut the outlook to
"negative" for Wells Fargo & Co's credit ratings on
Tuesday, citing troubles the bank is facing from opening
unauthorized customer accounts.
Although the credit-rating firm cut Wells' outlook from
"stable," it affirmed the bank's existing rating of AA-, which
In an announcement, Fitch cited "potential reputational
damage from the recent regulatory actions and fines," as well as
a belief that Wells could face "earnings pressure."
A Wells Fargo spokesman declined to comment on the Fitch
Wells Fargo last month reached a $185 million settlement
with a federal consumer regulator and Los Angeles prosecutor
over opening as many as 2 million accounts for retail customers
without their permission. Two congressional hearings and several
other investigations have followed, and Wells shares have lost
more than 12 percent of their value.
Though Wells Fargo has been downgraded by at least one stock
analyst, Fitch's outlook change is the most significant credit
ratings impact since the scandal erupted.
Both Fitch and Moody's Investors Service had earlier said
the sham accounts were "credit negative" for Wells Fargo, but
had not changed their ratings or outlook.
Investors have not shown much worry about the impact on
Wells Fargo's ability to meet its debt obligations.
The price of insuring $10 million worth of Wells Fargo debt
maturing in five years was unchanged on Tuesday at $64,000 per
year following the Fitch announcement, according to credit
default swaps (CDS) prices from Markit, the financial
information services company. That compares to $67,000 for
JPMorgan Chase & Co and $85,000 for Bank of America Corp
On Sept. 7, that same insurance cost $48,000 for Wells
Fargo, $58,000 for JPMorgan and $75,000 for Bank of America.
Wells Fargo shares fell 0.2 percent on Tuesday to close at
(Reporting by Dan Freed in New York; Additional reporting by
Jessica Kuruthukulangara in Bengaluru; Editing by Lauren Tara
LaCapra and Sandra Maler)