New York, October 25, 2018 -- Moody's Investors Service ("Moody's") has upgraded the long-term
debt and deposit ratings, counterparty risk ratings and counterparty
risk assessments of JP Morgan Chase & Co. (JPM, senior
debt to A2 from A3) and certain subsidiaries, as well as the baseline
credit assessment (BCA) of its principal bank subsidiary, JPMorgan
Chase Bank N.A. (deposits to Aa1 from Aa2, BCA to
a2 from a3). Moody's also upgraded the short-term ratings
of JPM to Prime-1 from Prime 2, while affirming all other
Prime 1 short-term ratings of JPM's rated subsidiaries.
All rating outlooks are stable. This concludes a review commenced
on August 2, 2018 and a complete list of affected ratings and entities
can be found at the end of this press release.
RATINGS RATIONALE
The upgrade of the bank's BCA to a2 places JP Morgan's baseline
credit assessment at the top end of global banking peers with extensive
capital market operations. The upgrade reflects the breadth and
strength of JP Morgan's four franchises -- Consumer and Community
Banking, Commercial Banking, Asset and Wealth Management and
Corporate and Investment Banking. Management has steadily raised
the customer value proposition and profitability of each of these businesses
to a position among the industry leaders. Each business has significant
scale, producing reliable earnings streams ($44 billion of
pre-provision profits in the last twelve months) that can be selectively
reinvested into the franchise.
JP Morgan's business mix also produces noteworthy diversification
benefits for bondholders, providing a sturdy buffer against the
greater volatility of the bank's capital markets activity.
JPM's inherent capital market risks are further mitigated by the
more stable treasury and securities service businesses housed within the
investment bank, as well as the scale and completeness of the firm's
primary and secondary capabilities, which allow it to be selective
in the capital markets activity it pursues.
JP Morgan's client driven execution has produced consistent growth
in customer balances and engagement in each of the bank's four franchises.
This has allowed JP Morgan to capture market share in many businesses
- such as retail deposits, wealth management, investment
banking and secondary trading. Although loan growth has been rapid
at times, the bank has demonstrated agility and a willingness to
pull back when it feels credit conditions are weakening. The loan
growth has also been driven in part by footprint expansion and not primarily
by a relaxation in underwriting standards. This nimble approach
to growth has bolstered JP Morgan's competitive advantage and Moody's
expects it will help sustain the bank's low levels of earnings volatility
compared to peers.
"JP Morgan has developed into a formidable banking decathlete,
with the financial muscle, endurance and reflexes to react quickly
as client needs evolve," said Peter Nerby, Moody's
lead analyst.
JP Morgan has also demonstrated effective risk management and governance
despite the complexity of its business model. Management's
comprehensive and proactive approach to controlling risk, combined
with JP Morgan's franchise strength and diversification, should
lead to better capacity than most peers to generate capital and maintain
bondholder protections during cyclical downturns. Furthermore,
the board has established a credible succession plan to ensure management
continuity in a wide range of scenarios.
The continuing emergence of digitally focused competitors poses a threat
to incumbent financial services firms. However, Moody's expects
that JP Morgan's scale, earnings capacity, and diversity
of businesses will allow the firm to continue innovating its client offerings,
retain its key relationships and maintain its competitive advantage,
even as digital disruption of banking accelerates.
STRUCTURAL AND SUPPORT CONSIDERATIONS
Moody's existing assumptions of Loss Given Failure (LGF) uplift
and Government support remain unchanged for JPM and its subsidiaries.
After the upgrade, JPMorgan Chase Bank N.A.'s
deposit and counterparty risk ratings are Aa1, both four notches
above the a2 baseline credit assessment, including 3 notches of
LGF benefit reflecting Moody's expectation of an extremely low severity
of loss in the event of a default, and one notch reflecting a moderate
likelihood of systemic support. Senior debt at the lead bank level
is rated Aa2 and lead bank subordinated debt is rated (P)Aa3 as both classes
are expected to face very low loss given failure and receive two notches
of LGF benefit. Senior debt at the lead bank level also receives
a further one notch of benefit reflecting a moderate likelihood of systemic
support.
After the upgrade, the senior debt rating of the holding company,
JPMorgan Chase & Co, is A2, the same level as the bank's
baseline credit assessment reflecting expectation of moderate loss given
failure. JPM's holding company debt ratings do not incorporate
any lift to reflect the potential for US government support. For
subordinated securities issued by the holding company, our LGF analysis
indicates a high loss-given-failure, and are rated
one notch below the BCA at A3. The ratings on more junior holding
company obligations also incorporate additional downward notching from
the BCA reflecting the coupon suspension risk ahead of potential failure.
In addition to JP Morgan Chase Bank N.A., Moody's
also upgraded the long-term ratings of four other operating subsidiaries,
namely Chase Bank USA National Association; J.P. Morgan
Securities LLC; J.P. Morgan Securities plc and JP Morgan
AG. These entities are closely integrated with the group --
managerially, operationally and financially and are very likely
to be supported. As such, each entity carries an adjusted
standalone assessment (or adjusted BCA in the case of Chase Bank USA National
Association and JP Morgan AG) equal to that of the group. Therefore,
the upgrades of the ratings of these entities were driven by the upgrade
of the group's BCA to a2.
Moody's believes creditors of Chase Bank USA National Association,
an FDIC-insured US bank affiliate of JPMorgan Chase Bank NA,
would benefit from the FDIC cross-indemnification provisions and
as such would be resolved together with JP Morgan Chase Bank NA.
The ratings of Chase Bank USA National Association's obligations
are thus rated at the same level as those of JP Morgan Chase Bank NA.
Moody's believes that in resolution creditors at each of J.P.
Morgan Securities LLC, J.P. Morgan Securities plc
and JP Morgan AG would benefit from the loss-absorption provided
by the bail-in of creditors at JPM's holding company consistent
with the firm's resolution plan and the US banking regulators adoption
of single-point of entry receivership as their preferred bank resolution
framework. However, Moody's does not expect creditors
at those subsidiaries would benefit from any loss absorption provided
by junior instruments at JPM's US bank subsidiaries. This
translates into two notches of LGF uplift for the Aa3 Issuer ratings of
each of the three subsidiaries. The Aa1 deposit rating and counterparty
risk rating of JP Morgan AG as well as the Aa1(cr) counterparty risk assessments
of all three subsidiaries incorporate 3 notches of LGF uplift plus one
notch of uplift reflecting a moderate likelihood of government support
due to the systemic importance of these subsidiaries as material legal
entities and major trading counterparties and clearing vehicles.
WHAT COULD MOVE THE RATINGS UP/DOWN
The large size and complexity of JP Morgan's capital markets businesses
can pose substantial creditor risks, and further upgrades would
likely require a reduction of the relative size of this business or its
risk profile.
JP Morgan could be downgraded if the bank experiences a significant deterioration
in its capital or liquidity levels, demonstrates a marked increase
in its risk appetite, or experiences a major litigation or other
sizeable operational risk charge or control failure.
Under Moody's advanced Loss-Given-Failure (LGF) framework,
upward or downward rating pressure could develop for various debt tranches
at the operating subsidiaries or the holding company if there is a sustained
change in the thickness of tranches or the subordination underneath tranches,
relative to tangible banking assets and losses estimated in the framework.
For Chase Bank USA NA, J.P. Morgan Securities LLC,
J.P. Morgan Securities plc, and JP Morgan AG;
Factors that could lead to a change in ratings of these legal entities
include ; 1) a change in the group's BCA of a2, 2) a
change in the willingness and capacity of the group to provide support;
3) a change in the intrinsic financial strength of the legal entity.
The principal methodology used in rating JPMorgan Chase & Co.,
JPMorgan Chase Bank, N.A., Chase Bank USA,
National Association, JPMorgan Chase Bank, N.A.,
London Branch, JPMorgan Chase Bank, N.A.,
New York Branch, JPMorgan Chase Bank, N.A.,
Paris Branch, JPMorgan Chase Bank, N.A.,
Singapore Br, JPMorgan Chase Bank, N.A.,
Toronto, J.P. Morgan AG, JP Morgan International
Derivatives Ltd, JP MORGAN STRUCTURED PRODUCTS BV, JPMorgan
Chase Financial Company LLC, BANK ONE Capital III, BANK ONE
CORPORATION, Bank One, Michigan, Bear Stearns Companies
LLC. (The), J.P. Morgan & Co. Incorporated,
and Morgan Guaranty Trust Company of New York was Banks published in August
2018. The principal methodologies used in rating J.P.
Morgan Securities, LLC and J.P. Morgan Securities
plc were Banks published in August 2018, and Securities Industry
Market Makers published in June 2018. Please see the Rating Methodologies
page on www.moodys.com for a copy of these methodologies.
Upgrades:
..Issuer: JPMorgan Chase & Co.
.... Issuer Rating, Upgraded to A2 from
A3, stable from rating under review
.... Junior Subordinated Regular Bond/Debentures,
Upgraded to Baa1 (hyb) from Baa2 (hyb)
.... Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A2 from (P)A3
.... Subordinate Medium-Term Note Program,
Upgraded to (P)A3 from (P)Baa1
.... Senior Unsecured Shelf, Upgraded
to (P)A2 from (P)A3
.... Pref. Shelf Non-cumulative,
Upgraded to (P)Baa2 from (P)Baa3
.... Subordinate Shelf, Upgraded to
(P)A3 from (P)Baa1
.... Pref. Stock Non-cumulative,
Upgraded to Baa2 (hyb) from Baa3 (hyb)
.... Subordinate Regular Bond/Debentures,
Upgraded to A3 from Baa1
.... Senior Unsecured Regular Bond/Debentures,
Upgraded to A2 from A3, stable from rating under review
.... Commercial Paper, Upgraded to P-1
from P-2
.... Other Short-Term, Upgraded
to (P)P-1 from (P)P-2
..Issuer: JPMorgan Chase Bank, N.A.
.... Adjusted Baseline Credit Assessment,
Upgraded to a2 from a3
.... Baseline Credit Assessment, Upgraded
to a2 from a3
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
.... Issuer Rating, Upgraded to Aa2
from Aa3, stable from rating under review
.... Subordinate Bank Note Program,
Upgraded to (P)Aa3 from (P)A1
.... Senior Unsecured Bank Note Program,
Upgraded to (P)Aa2 from (P)Aa3
.... Subordinate Medium-Term Note Program,
Upgraded to (P)Aa3 from (P)A1
.... Senior Unsecured Medium-Term Note
Program, Upgraded to (P)Aa2 from (P)Aa3
.... Senior Unsecured Regular Bond/Debentures,
Upgraded to Aa2 from Aa3, stable from rating under review
..Issuer: Chase Bank USA, National Association
.... Adjusted Baseline Credit Assessment,
Upgraded to a2 from a3
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... Issuer Rating, Upgraded to Aa2
from Aa3, stable from rating under review
.... Subordinate Bank Note Program,
Upgraded to (P)Aa3 from (P)A1
.... Senior Unsecured Bank Note Program,
Upgraded to (P)Aa2 from (P)Aa3
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
.... Senior Unsecured Regular Bond/Debentures,
Upgraded to Aa2 from Aa3, stable from rating under review
..Issuer: BANK ONE Capital III
.... Backed Pref. Stock Preferred Stock,
Upgraded to Baa1 (hyb) from Baa2 (hyb)
..Issuer: BANK ONE CORPORATION
.... Subordinate Regular Bond/Debentures,
Upgraded to A3 from Baa1
..Issuer: Bank One, Michigan
.... Subordinate Regular Bond/Debenture,
Upgraded to Aa3 from A1
..Issuer: Bear Stearns Companies LLC. (The)
.... Senior Unsecured Regular Bond/Debentures,
Upgraded to A2 from A3, stable from rating under review
..Issuer: J.P. Morgan & Co.
Incorporated
.... Subordinate Regular Bond/Debentures,
Upgraded to A3 from Baa1
.... Senior Unsecured Regular Bond/Debentures,
Upgraded to A2 from A3, stable from rating under review
..Issuer: J.P. Morgan AG
.... Adjusted Baseline Credit Assessment,
Upgraded to a2 from a3
.... Baseline Credit Assessment, Upgraded
to a2 from a3
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... LT Issuer Rating, Upgraded to Aa3
from A1, stable from rating under review
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
..Issuer: J.P. Morgan Securities plc
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Issuer Rating, Upgraded to Aa3
from A1, stable from rating under review
..Issuer: J.P. Morgan Securities,
LLC
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Issuer Rating, Upgraded to Aa3
from A1, stable from rating under review
..Issuer: JP Morgan International Derivatives Ltd
.... Backed Senior Unsecured Regular Bond/Debentures,
Upgraded to Aa2 from Aa3, stable from rating under review
..Issuer: JP MORGAN STRUCTURED PRODUCTS BV
... Backed Senior Unsecured Medium-Term Note
Program, Upgraded to (P)Aa2 from (P)Aa3
..Issuer: JPMorgan Chase Bank, N.A.,
London Branch
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... Senior Unsecured Medium-Term Note
Program, Upgraded to (P)Aa2 from (P)Aa3
..Issuer: JPMorgan Chase Bank, N.A.,
New York Branch
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... Subordinate Medium-Term Note Program,
Upgraded to (P)Aa3 from (P)A1
.... Senior Unsecured Medium-Term Note
Program, Upgraded to (P)Aa2 from (P)Aa3
..Issuer: JPMorgan Chase Bank, N.A.,
Paris Branch
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
..Issuer: JPMorgan Chase Bank, N.A.,
Singapore Br
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
.... Senior Unsecured Medium-Term Note
Program, Upgraded to (P)Aa2 from (P)Aa3
..Issuer: JPMorgan Chase Bank, N.A.,
Toronto
.... LT Counterparty Risk Assessment,
Upgraded to Aa1(cr) from Aa2(cr)
.... LT Counterparty Risk Rating, Upgraded
to Aa1 from Aa2
.... LT Bank Deposit Rating, Upgraded
to Aa1 from Aa2, stable from rating under review
..Issuer: JPMorgan Chase Financial Company LLC
.... Backed Senior Unsecured Medium-Term
Note Program, Upgraded to (P)A2 from (P)A3
.... Backed Senior Unsecured Regular Bond/Debentures,
Upgraded to A2 from A3, stable from rating under review
.... Backed Senior Unsecured Shelf,
Upgraded to (P)A2 from (P)A3
..Issuer: Morgan Guaranty Trust Company of New York
.... Backed Senior Unsecured Regular Bond/Debenture,
Upgraded to Aa2 from Aa3, stable from rating under review
Confirmations:
..Issuer: Chase Bank USA, National Association
.... Baseline Credit Assessment, Confirmed
at baa3
Affirmations:
..Issuer: Chase Bank USA, National Association
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Bank Note Program, Affirmed
(P)P-1
.... ST Bank Note Program, Affirmed
P-1
.... ST Bank Deposit Rating, Affirmed
P-1
..Issuer: J.P. Morgan AG
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Issuer Rating, Affirmed P-1
.... ST Bank Deposit Rating, Affirmed
P-1
..Issuer: J.P. Morgan Securities plc
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Issuer Rating, Affirmed P-1
..Issuer: J.P. Morgan Securities,
LLC
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Issuer Rating, Affirmed P-1
.... Commercial Paper, Affirmed P-1
..Issuer: JP MORGAN STRUCTURED PRODUCTS BV
.... Backed Other Short Term, Affirmed
(P)P-1
..Issuer: JPMorgan Chase Bank, N.A.
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Bank Deposit Rating, Affirmed
P-1
.... ST Bank Note Program, Affirmed
P-1
.... Other Short Term, Affirmed (P)P-1
..Issuer: JPMorgan Chase Bank, N.A.,
London Branch
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... Other Short Term, Affirmed (P)P-1
..Issuer: JPMorgan Chase Bank, N.A.,
New York Branch
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
..Issuer: JPMorgan Chase Bank, N.A.,
Paris Branch
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Bank Deposit Rating, Affirmed
P-1
..Issuer: JPMorgan Chase Bank, N.A.,
Singapore Br
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Bank Deposit Rating, Affirmed
P-1
.... Other Short Term, Affirmed (P)P-1
..Issuer: JPMorgan Chase Bank, N.A.,
Toronto
.... Backed Commercial Paper, Affirmed
P-1
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Bank Deposit Rating, Affirmed
P-1
Outlook Actions:
..Issuer: Bear Stearns Companies LLC. (The)
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Chase Bank USA, National Association
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: J.P. Morgan & Co.
Incorporated
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: J.P. Morgan AG
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: J.P. Morgan Securities plc
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: J.P. Morgan Securities,
LLC
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JP Morgan International Derivatives Ltd
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JP MORGAN STRUCTURED PRODUCTS BV
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase & Co.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.,
London Branch
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.,
New York Branch
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.,
Paris Branch
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.,
Singapore Br
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Bank, N.A.,
Toronto
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: JPMorgan Chase Financial Company LLC
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Morgan Guaranty Trust Company of New York
....Outlook, Changed To Stable From
Rating Under Review
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.
Peter E. Nerby
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
Ana Arsov
MD - Financial Institutions
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
