New York, May 24, 2017 -- Moody's Investors Service has affirmed all of the ratings of Wells Fargo
& Company and those of its subsidiaries. The parent company
is rated A2 for senior debt and its bank subsidiary, Wells Fargo
Bank, N.A., has deposit ratings of Aa1/Prime-1
and a standalone baseline credit assessment (BCA) of a2. The bank
also has a Aa2 senior debt rating and a Aa3 subordinated debt rating,
and its counterparty risk assessments are Aa1(cr)/Prime-1(cr).
Wells Fargo's rating outlook remains stable.
The following ratings have been affirmed:
Issuer: Wells Fargo & Company
... Long Term Issuer Rating, A2, Stable
... Commercial Paper, P-1
... Other Short Term, (P)P-1
... Senior Unsecured Regular Bond/Debenture Rating,
A2, Stable
... Senior Unsecured MTN, (P)A2
... Senior Unsec. Shelf, (P)A2
... Subordinate Rating, A3
... Subordinate MTN, (P)A3
... Subordinate Shelf, (P)A3
... Pref. Shelf, (P)Baa1
... Pref. shelf Non-cumulative,
(P)Baa2
... Pref. Stock Non-cumulative,
Baa2 (hyb)
... Outlook, Stable
Issuer: Wells Fargo Bank, N.A.
... Long Term Bank Deposits, Aa1, Stable
... Short Term Bank Deposits, P-1
... Deposit Note/CD Program, P-1
... Long Term Issuer Rating, Aa2, Stable
... Short Term Bank Note Program, (P)P-1
... Senior Unsecured Regular Bond/Debenture Rating,
Aa2, Stable
... Senior Unsecured Bank Note Program, (P)Aa2
... Subordinate Bank Note Program, (P)Aa3
... Subordinate Rating, Aa3
... Long Term Counterparty Risk Assessment,
Aa1(cr)
... Short Term Counterparty Risk Assessment,
P-1(cr)
... Adjusted Baseline Credit Assessment, a2
... Baseline Credit Assessment, a2
... Outlook, Stable
Issuer: Wells Fargo Bank Northwest, N.A.
... Long Term Bank Deposits, Aa1, Stable
... Short Term Bank Deposits, P-1
... Long Term Issuer Rating, Aa2, Stable
... Long Term Counterparty Risk Assessment,
Aa1(cr)
... Short Term Counterparty Risk Assessment,
P-1(cr)
... Adjusted Baseline Credit Assessment, a2
... Baseline Credit Assessment, a2
... Outlook, Stable
Issuer: Wells Fargo Capital II
... BACKED Pref. Stock, Baa1(hyb)
Issuer: Wachovia Corporation
... BACKED Senior Unsecured Regular Bond/Debenture
Rating, A2, Stable
... BACKED Subordinate Rating, A3
... BACKED Pref. Stock Non-cumulative,
Baa2 (hyb)
Issuer: CoreStates Capital II
... BACKED Pref. Stock, A1(hyb)
Issuer: CoreStates Capital III
... BACKED Pref. Stock, A1(hyb)
Issuer: First Union Capital II
... BACKED Pref. Stock, Baa1(hyb)
Issuer: First Union National Bank of Florida
... BACKED Subordinate Rating, Aa3
Issuer: SouthTrust Bank
... BACKED Subordinate Rating, Aa3
Issuer: SouthTrust Bank of Georgia, N.A. (Old)
... BACKED Subordinate Rating, Aa3
Issuer: Wachovia Bank, N.A.
... BACKED Subordinate Rating, Aa3
Issuer: Wachovia Corporation (Old)
... BACKED Subordinate Rating, A3
Issuer: Central Fidelity Capital Trust I
... BACKED Pref. Stock, Baa1(hyb)
Issuer: Wachovia Bank, N.A. (Old)
... BACKED Senior Unsecured Regular Bond/Debenture
Rating, Aa2, Stable
Issuer: Wachovia Capital Trust II
... BACKED Pref. Stock, Baa1(hyb)
Issuer: Wachovia Capital Trust III
... BACKED Pref. Stock, Baa2(hyb)
Issuer: Wells Fargo Capital X
... BACKED Pref. Stock, Baa1(hyb)
Issuer: Wells Fargo Canada Corporation
... BACKED Senior Unsecured Regular Bond/Debenture
Rating, A2, Stable
... BACKED Senior Unsecured MTN, (P) A2
... BACKED Commercial Paper, P-1
... Outlook, Stable
RATINGS RATIONALE
The rating affirmation is supported by Wells Fargo's diverse business
mix, which performs well throughout the cycle. In particular,
Wells Fargo has strong market positions in domestic retail and commercial
banking, a franchise that results in solid earnings, healthy
liquidity and good internal capital generation.
The strength of Wells Fargo's franchise was tested by the public
and political outcry that followed the September 2016 regulatory sanctions
resulting from the bank's sales practices failures. Despite
being slow in its initial response, Wells Fargo took several corrective
measures, and its recent performance indicates that the risk of
franchise erosion has dissipated.
Nonetheless, Moody's expects Wells Fargo's retail banking
growth metrics to remain subdued and its expenses to remain elevated,
at least for the balance of 2017, because of additional regulatory
and legal costs. Nevertheless, Moody's expects Wells
Fargo's overall financial metrics to remain healthy.
Regarding Wells Fargo's balance sheet, credit quality, liquidity
and capital are all sound. Wells Fargo's net charge-off
rate is low despite a recent uptick in certain consumer credit categories,
specifically credit cards and auto loans. This good asset risk
profile is reinforced by lower concentration risk than in the past,
as residential real estate exposures have declined as a percentage of
total loans. Regarding liquidity, it is supported not only
by Wells Fargo's strong nationwide deposit base, but also by its
sizable cash holdings and portfolio of high quality securities.
Although Moody's considers Wells Fargo's capital profile to
be healthy, it is less of a rating strength than the bank's asset
risk and liquidity profiles. Nonetheless, Moody's believes
that Wells Fargo's capital has an above-average resilience to stress
and also notes that the bank's capital position has grown in recent
periods, which is a favorable development.
With respect to profitability, Wells Fargo's recurring earnings
are supported by its well-balanced revenue stream, with nearly
half generated from noninterest income, which is above average for
US banks. Longer-term, Wells Fargo has outlined a
number of expense management initiatives that it aims to achieve by the
end of 2019.
While most of the initial expense reductions will be reinvested in its
business, approximately $2 billion of cost savings identified
by management will boost future net earnings. Moody's will
evaluate the effectiveness of these initiatives on the bank's credit
profile in future periods. In the next year, however,
Moody's stressed that it does not expect Wells Fargo's return
on average assets (ROAA) to rebound materially, even as its net
interest margin is set to improve from a rising rate environment.
Overall, Moody's considers Wells Fargo's standalone BCA to be appropriately
positioned one notch higher than the US median bank BCA. In addition,
Wells Fargo's stable outlook anticipates little change in its creditworthiness
over the next year.
What Could Change the Rating - Up
Regarding Wells Fargo's BCA, significantly stronger risk-weighted
profitability metrics are a prerequisite for upward movement, as
is a more robust capital position. However, Moody's
sees no opportunity for positive rating pressure to emerge until the fallout
from Wells Fargo's retail banking sales misconduct is fully behind
it, which is not likely in the next 12 -18 months.
What Could Change the Rating - Down
With respect to Wells Fargo's BCA, the most likely cause of downward
movement would be an outsized spike in nonperforming assets. In
addition, Moody's cannot rule out the potential that negative
rating pressure will result from future developments stemming from Wells
Fargo's retail banking sales misconduct. In particular,
if recent governance improvements are not maintained, that would
be viewed negatively.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Allen Tischler
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
