Following its large regional banking group review, Fitch Ratings downgraded the long-term issuer default ratings of Wells Fargo & Co., Fifth Third Bancorp and respective subsidiaries Wells Fargo Bank NA and Fifth Third Bank.
Fitch on Oct. 3 changed Wells Fargo's long-term IDR to A+ from AA-. Its short-term IDR was lowered to F1 from F1+. Wells Fargo Bank's long-term IDR slid to AA- from AA, but its short-term IDR was affirmed at F1+. The ratings outlook is "stable."
The rating agency attributed the change to an earnings profile that is no longer likely to exceed peers' as much as it had. Recent missteps in the company's risk controls have been largely addressed, and the related expenses have been manageable, but Fitch expects improvements in governance to "take longer than anticipated."
Fitch lowered Fifth Third's and Fifth Third Bank's long-term IDR to A- from A, but affirmed their short-term IDRs at F1. The outlook is "stable."
The downgrade reflects the "unexpected" acceleration of Fifth Third's divestiture of Vantiv stock. The sale of the entire Vantiv stake, while lessening Fifth Third's earnings volatility, could also be a loss of income, unless properly offset, according to Fitch.
Fitch upgraded Regions Financial Corp.'s long-term IDR to BBB+ from BBB and affirmed its short-term IDR at F2. The outlook was revised to "stable" from "positive."
The rating agency commented on the company's ability to lag deposit pricing, thanks to a deposit base concentrated in less urban areas. Its asset quality, however, is a constraint on ratings.
Fitch affirmed 11 other companies' long-term IDRs: U.S. Bancorp's at AA; BB&T Corp.'s and PNC Financial Services Group Inc.'s at A+; MUFG Americas Holdings Corp.'s, M&T Bank Corp.'s and Comerica Inc.'s at A; SunTrust Banks Inc.'s, Capital One Financial Corp.'s, KeyCorp's and Huntington Bancshares Inc.'s at A-; and Citizens Financial Group Inc.'s at BBB+.
Fitch further revised Comerica's and KeyCorp's ratings outlook to "stable" from "negative," commenting on the former's "consistent" earnings profile and KeyCorp's successful progress in integrating First Niagara Financial Group Inc.
The rating agency also said BB&T's pause from bank-related acquisitions is a positive, as the company continues to resolve regulatory consent orders. Meanwhile, M&T could return to acquisitiveness, now that the Federal Reserve's written agreement has been lifted. That said, the company will likely choose to wait as it digests Hudson City Bancorp Inc.