S&P Revises JPMorgan Outlook, Affirms Credit Rating
Standard & Poor’s Ratings Services said it revised the ratings outlook on JPMorgan Chase and its banking subsidiaries to stable from negative. At the same time, S&P said it affirmed its ‘A/A-1′ issuer credit ratings on JPM and our ‘A1′ issuer credit ratings on its banking subsidiaries.
“The outlook revision reflects our belief that JPM has successfully addressed our concerns related to its Chief Investment Office losses, risk-management practices, and governance issues,” said Standard & Poor’s credit analyst Stuart Plesser. “Specifically, we believe that risk-management missteps were isolated to the CIO unit and that JPM has properly remediated them, or is in the process of doing so. In addition, we believe the synthetic credit portfolio, which gave rise to the CIO losses, has been wound down, for the most part, and additional losses, if any, will be immaterial.”
However, the investment strategy in the CIO was aggressive, in our view. Although we consider the losses resulting from the SCP to be an egregious oversight by management, the bank has taken swift corrective actions, the CIO risk-management missteps appear to be an isolated event, and the losses — in the context of the company’s overall earnings power — were manageable.
The ratings outlook on JPM is stable, reflecting our belief that the company has remediated, or is in the process of remediating, missteps in risk management and that these missteps are isolated to the CIO unit.