Fitch considering potential downgrade of multiple banks, including JPMorgan: CNBC

Fitch Ratings, a notable credit ratings agency, has cautioned that it could potentially downgrade several significant banks, including JP Morgan Chase, according to a CNBC report cited by Reuters.

Chris Wolfe, an analyst at Fitch Ratings, highlightedthat the industry's health assessment experienced a setback earlier this year, though with limited public attention.

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The firm in June reduced the industry’s "operating environment" grade to AA- from AA due to the regular gap in the country’s credit rating exposed by the March regional bank and persisting interest rate volatility.

This downgrade to A+ can lead to lower industry scores than some of the top-rated lenders. In this scenario, the country's two largest banks by assets, JPMorgan and Bank of America, would most likely be downgraded to A+ from AA- because banks cannot be rated higher than the environment in which they operate.

Wolfe also highlighted thatif big banks like JP Morgan are downgraded, Fitch will be obliged to contemplate downgrades on all of their peers' ratings. This might push some of the weaker lenders closer to the non-investment-grade classification.

Furthermore, bond investors' trusted credit rating agencies have recently roiled markets with their activities. Moody, a credit rating agency, downgraded ten small and midsized banks last week and warned of further downgrades for another 17 lenders, including larger institutions such as Truist and U.S. Bank.

Fitch downgraded the United States' long-term credit rating earlier this month due to political turmoil and rising debt loads, a decision criticized by corporate leaders like JPMorgan CEO Jamie Dimon.

(Inputs from Reuters)

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