Fitch May Downgrade US Banks, including JPMorgan

Fitch Ratings is worried about the health of the US banking sector. Back in June, Fitch slightly reduced its outlook on the banking industry. While this change went mostly unnoticed by the public, any further reductions could have significant implications.

Analyst Chris Wolfe from Fitch said if the banking industry's score is downgraded again from AA- to A+, it might lead to rating reassessments for many other US banks. Such a shift in ratings could lead to several banks, including major ones like JPMorgan Chase, facing downgrades.  

This development follows shortly after Moody's declaration that it had cut ratings for 10 banks due to concerns surrounding higher interest rates and increasing risks in the commercial real estate sector. M&T Bank, Pinnacle Financial, and Webster Financial were among the banks affected.

Wolfe said the decision to downgrade isn't final, but the possibility remains. This alertness comes from various factors including concerns about the US credit rating, recent regional bank failures, and unpredictability concerning interest rates.

Factors like interest rates set by the Federal Reserve and the potential rise in loan defaults, especially in a rising interest rate scenario, play a critical role in Fitch's decision. The broader implications of such widespread downgrades could affect the financial markets, possibly making it costlier for banks to borrow and impacting their profitability.