S&P cuts Wells Fargo outlook, says investigations could reveal more impropriety
S&P Global Ratings said it revised its outlook on Wells Fargo to negative from stable. The ratings agency affirmed the A/A-1 issuer credit ratings on Wells and the AA-/A-1+ issuer credit ratings on Well's main operating subsidiaries. The group credit profile remains a+. "Our outlook revision reflects the increased business risks for Wells over the past few weeks, stemming from accelerated reputational issues from the September 8 news of the company's retail accounts sales misconduct over recent years. Uncertainty has increased, in our view, regarding the scope and ramifications of the misconduct, the duration and magnitude of the reputational damage, the possible impact on the company's customer flows, and the potential consequences of ongoing legal and regulatory investigations. Additionally, the company's management team and retail business model are unexpectedly in transition as a result of this misconduct, and this may lessen our view of the company's business stability relative to highly rated peers. Wells will likely continue to face significant business challenges for at least several months. We believe that the company's settlement with the CFPB, OCC, and LA Attorney of $185M, which is very small relative to the company's financial strength, may not sufficiently capture the damage caused by the retail sales misconduct. A number of ongoing internal and third-party investigations could reveal additional inappropriate practices at the retail bank," said the agency.