After Fitch Ratings warned that the Wall Street bank may be downgraded, JPMorgan shares dropped.
Fitch has warned that the operating climate for the financial services sector might lead to downgrades for Wall Street firms like JPMorgan. Stocks of other financial institutions also fell in response to the news, with JPMorgan Chase’s falling 2.6% to $150.64 a share.
Analyst Chrise Wolfie told CNBC that the rating agency would have to reevaluate its assessments on the more than 70 US banks it follows if it were to downgrade to A+ from AA-.
Wolfe said that upgrading to an A+ would cause a recalculation of all financial metrics and lead to downgrades.
At the beginning of August, Fitch also cut the United States’ long-term credit rating, citing the country’s political instability and increasing debt levels as reasons. Several industry executives, including JPMorgan’s CEO Jamie Dimon, criticised the action strongly since it seemed unnecessary after the debt limit problem was resolved two months earlier.
One of the three major credit rating agencies, Fitch, recently downgraded the United States’ credit rating from AAA to AA+, the first such fall in more than a decade. According to Fitch, rising budget deficits have been caused by tax cuts, expenditure programmes, and multiple economic headwinds, while mid-term issues related to entitlement costs have been largely ignored.
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