Wells Fargo not included in Moody’s ratings owing to majority operations in the US, says Stumpf

Moody’s reviewed it’s listings of 17 banks from the US which have a major stack in the international markets as well. Though it is not the first time that Moody’s has revised its ratings, the results for 2012 are less than stellar for most of the 17 banks. One bank however, made it through with bright colours, Wells Fargo.

The reason why Wells Fargo did not receive a downgrade in the latest issue from performance rating agency is that it was not on the list. However, this is not to say that the banks merely sneaked out from gauntlet.  The major reason for is exclusion from the list is that majority of its operations are US-based. Only a small portion of its loaning portfolio is offered to the international market.

The majority of Wells Fargo’s business is here in the U.S. CEO John Stumpf explained earlier this year nearly all of his bank’s revenue is domestic. Foreign loans are a mere 5% of its portfolio.

Moody’s released the ratings on 15 banks from all over the world including Bank of America, Citi Group, Morgan Stanley, JP Morgan Chase and Barclays.  When Moody’s first announced in February, 2012 that it will be reviewing the ratings for 17 banks, Wells Fargo was not included for scrutiny.

According to the company:

“Underpinning this review is Moody’s view that these firms face challenges that are not fully captured in their current ratings. Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions. These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer term profitability and growth prospects of these firms.”

Wells Fargo’s operating in the US earned them relatively better returns as well. “Given the consistency of Wells Fargo’s earnings Moody’s would have a tough time throwing it in with JPMorgan and Bank of America,” bank analyst Nancy Bush explained.

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Posted by Usman Khalid on Jun 23 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.