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By Dan Freed
Oct 4 (Reuters) - 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 is investment-grade.
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 announcement.
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 $43.75. (Reporting by Dan Freed in New York; Additional reporting by Jessica Kuruthukulangara in Bengaluru; Editing by Lauren Tara LaCapra and Sandra Maler)