New York, August 13, 2019 -- 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).
In addition, Wells Fargo's rating outlook was changed to stable
from negative.
"Wells Fargo is in the somewhat unique position of having suffered
a significant reputational hit and severe regulatory sanctions without
any discernable impact on its balance sheet fundamentals, though
its profitability has suffered due to minimal revenue growth and increased
expenses", noted Moody's Senior Vice President Allen
Tischler. "The firm's healthy balance sheet reduces
the likelihood of downward rating pressure and supports a stable outlook",
Mr. Tischler added.
RATINGS RATIONALE
The affirmation of Wells Fargo's ratings recognizes its continued balance
sheet strength, in particular its good capital, liquidity
and credit quality. In addition, Wells Fargo has made substantial
investments in its corporate risk management and compliance functions
in order to address the shortcomings that have been exposed in recent
years, while at the same time dedicating significant resources to
customer service enhancements. These positive attributes protect
against the franchise uncertainty stemming from Wells Fargo's ongoing
CEO search, its unresolved legal matters and its inability,
thus far, to fully satisfy its regulators' demands to address governance,
oversight and compliance risk management deficiencies.
Wells Fargo's balance sheet has been fortified since its initial
sales practices settlement with regulators in September 2016. In
particular, its capital position has increased, its asset
quality has improved, its consumer banking financial metrics have
been stable, its liquidity is robust and it has consistently performed
well in the Federal Reserve's annual bank stress test. Moreover,
Wells Fargo's balance sheet and franchise remain strong despite
other findings of wrongdoing over the past few years that led to regulatory
fines, other legal costs and numerous adverse media headlines.
In short, under duress, Wells Fargo has proven to be very
resilient.
Nonetheless, in changing Wells Fargo's rating outlook to stable,
Moody's recognizes that the bank remains exposed to additional penalties
and reputational damage from its prior sales practices and risk and compliance
shortcomings. Indeed, at some point, Moody's
expects Wells Fargo will be faced with a multi-billion dollar cost
to settle all outstanding governmental investigations, considering
that the high end of its range for reasonably possible potential litigation
losses in excess of established reserves has climbed to $3.9
billion as of June 30, 2019. This will result in more negative
headlines and could trigger incremental reputational damage.
"However, we believe any fines and penalties will be manageable
relative to Wells Fargo's earnings power and we do not anticipate
lasting customer fallout," said Mr. Tischler.
In addition, Moody's does not expect the eventual appointment
of a new CEO to lead to any significant changes in strategic direction
at the firm that could increase its risk profile. Overall,
based on the significant and ongoing investments and organizational changes
that Wells Fargo has undertaken over the past few years, it is likely
to emerge from its current challenges with stronger operational risk and
compliance management, and improved governance, in Moody's
view. However, its profitability will remain pressured by
elevated expenses and minimal revenue growth in the meantime.
Favorably, Wells Fargo has demonstrated that it can continue to
serve its core retail and commercial clients without exceeding the asset
cap imposed by the Federal Reserve in February 2018. This is credit
positive, particularly because it confines growth to core lending
activities at what may be the late stages of the economic cycle.
Nonetheless, if Wells Fargo is unable to satisfy the Fed's
requirements for lifting the asset cap in the next year or two,
that could signal deeper risk management and governance deficiencies and
cause Moody's to revisit the firm's ratings and/or outlook.
What Could Change the Rating - Up
The stable outlook indicates that there is no positive rating pressure
over the next 12-18 months. Longer-term, significantly
stronger profitability metrics, a continued healthy balance sheet
and the successful resolution of all legacy issues could result in upward
rating pressure.
What Could Change the Rating - Down
Management's inability to correct the firm's governance and
risk management deficiencies would be negative for the ratings.
In addition, any noticeable franchise erosion, such as a loss
of deposits, or an outsized spike in nonperforming assets would
also be negative for the ratings.
Affirmations:
..Issuer: CoreStates Capital II
....Pref. Stock Preferred Stock,
Affirmed A1 (hyb)
..Issuer: CoreStates Capital III
....Pref. Stock Preferred Stock,
Affirmed A1 (hyb)
..Issuer: First Union Capital II
....Pref. Stock Preferred Stock,
Affirmed Baa1 (hyb)
..Issuer: First Union National Bank of Florida
....Subordinate Regular Bond/Debenture,
Affirmed Aa3
..Issuer: SouthTrust Bank
....Subordinate Regular Bond/Debenture,
Affirmed Aa3
..Issuer: SouthTrust Bank of Georgia, N.A.
(Old)
....Subordinate Regular Bond/Debenture,
Affirmed Aa3
..Issuer: Wachovia Bank, N.A.
....Subordinate Regular Bond/Debenture,
Affirmed Aa3
..Issuer: Wachovia Bank, N.A.
(Old)
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, stable from negative
..Issuer: Wachovia Corporation
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Baa2 (hyb)
....Subordinate Regular Bond/Debenture,
Affirmed A3
..Issuer: Wachovia Corporation (Old)
....Subordinate Regular Bond/Debenture,
Affirmed A3
..Issuer: Wells Fargo & Company
....Issuer Rating, Affirmed A2,
stable from negative
....Subordinate Medium-Term Note Program,
Affirmed (P)A3
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A2
....Other Short Term, Affirmed (P)P-1
....Pref. Shelf, Affirmed (P)Baa1
....Pref. Shelf Non-Cumulative,
Affirmed (P)Baa2
....Senior Unsecured Shelf, Affirmed
(P)A2
....Subordinate Shelf, Affirmed (P)A3
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Baa2 (hyb)
....Subordinate Regular Bond/Debenture,
Affirmed A3
....Commercial Paper, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A2, stable from negative
..Issuer: Wells Fargo Bank, N.A.
....Adjusted Baseline Credit Assessment,
Affirmed a2
....Baseline Credit Assessment, Affirmed
a2
....Long Term Counterparty Risk Assessment,
Affirmed Aa1(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long Term Counterparty Risk Rating,
Affirmed Aa1
....Short Term Counterparty Risk Rating,
Affirmed P-1
....Issuer Rating, Affirmed Aa2,
stable from negative
....Deposit Note/CD Program, Affirmed
P-1
....Short Term Deposit Rating, Affirmed
P-1
....Long Term Deposit Rating, Affirmed
Aa1, stable from negative
....Subordinate Bank Note Program, Affirmed
(P)Aa3
....Senior Unsecured Bank Note Program,
Affirmed (P)Aa2
....ST Bank Note Program, Affirmed (P)P-1
....Subordinate Regular Bond/Debenture,
Affirmed Aa3
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, stable from negative
..Issuer: Wells Fargo Securities International Limited
....Issuer Rating, Affirmed A2,
stable from negative
....Other Short Term, Affirmed P-1
..Issuer: Central Fidelity Capital Trust I
....Pref. Stock Preferred Stock,
Affirmed Baa1 (hyb)
..Issuer: Wachovia Capital Trust II
....Pref. Stock Preferred Stock,
Affirmed Baa1 (hyb)
..Issuer: Wachovia Capital Trust III
....Pref. Stock Preferred Stock,
Affirmed Baa2 (hyb)
..Issuer: Wells Fargo Canada Corporation
....Commercial Paper, Affirmed P-1
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A2
....Senior Unsecured Regular Bond/Debenture,
Affirmed A2, stable from negative
..Issuer: Wells Fargo Capital X
....Pref. Stock Preferred Stock,
Affirmed Baa1 (hyb)
..Issuer: Wells Fargo Finance LLC
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A2
....Senior Unsecured Regular Bond/Debenture,
Affirmed A2, stable from negative
Outlook Actions:
..Issuer: Wells Fargo & Company
....Outlook, Changed To Stable From
Negative
..Issuer: Wells Fargo Bank, N.A.
....Outlook, Changed To Stable From
Negative
..Issuer: Wells Fargo Canada Corporation
....Outlook, Changed To Stable From
Negative
..Issuer: Wells Fargo Finance LLC
....Outlook, Changed To Stable From
Negative
..Issuer: Wells Fargo Securities International Limited
....Outlook, Changed To Stable From
Negative
The principal methodology used in these ratings was Banks published in
August 2018. 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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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
M. 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
