Duff & Phelps Upgrades Wells Fargo's Credit Ratings Amid Improved Asset Quality and Reduced Risk Profile

Strategic Insights -

Duff & Phelps Credit Rating Co. has upgraded the credit ratings of Wells Fargo & Company and its primary subsidiary, Wells Fargo Bank, N.A., reflecting significant improvements in asset quality measures and a reduced risk profile. The upgrade raises Wells Fargo's ratings for senior debt, subordinated debt, preferred stock, and commercial paper, while reaffirming its short-term obligation rating.

Key Takeaways:

  • Wells Fargo's senior debt rating has been upgraded to 'A' (Single-A) from 'A-' (Single-A-Minus) due to improved asset quality measures.
  • The company's subordinated debt rating has been upgraded to 'A-' (Single-A-Minus) from 'BBB+' (Triple-B-Plus), reflecting its reduced risk profile.
  • Wells Fargo's preferred stock rating has been upgraded to 'BBB+' (Triple-B-Plus) from 'BBB' (Triple-B).
  • The company's commercial paper rating has been upgraded to 'D-1' from 'D-1-' (One Minus).
  • Wells Fargo Bank's long-term senior obligation rating has been raised to 'A+' (Single-A-Plus) from 'A' (Single-A).
  • The company's problem asset levels have decreased significantly, with the noncurrent asset ratio decreasing to 3.0 percent in the first quarter of 1995, compared to over 7.5 percent in 1992.
  • The reserve coverage for noncurrent loans is almost three times the actual value, representing over 6 percent of total loans.
  • Enhancements in credit underwriting and administration processes are expected to minimize exposure to significant credit problems going forward.
  • Wells Fargo's strong core profitability is driven by its robust net interest margin and healthy levels of fee income.

Statistics:

  • Noncurrent asset ratio decreased from over 7.5 percent in 1992 to 3.0 percent in the first quarter of 1995.
  • Reserve coverage for noncurrent loans is almost three times the actual value, representing over 6 percent of total loans.
  • Loans as a percentage of total assets declined from almost 90 percent in 1990 to 63 percent in the first quarter of 1995.
  • Capital levels remain comfortably above the regulatory minimum level for a 'well-capitalized' institution.

Sources:

  • Press Release, Duff & Phelps Credit Rating Co., May 24, 1995
  • Thomas G. Stone, CPA, Duff & Phelps, 312-368-2064 (WFC) CO: Wells Fargo & Company; Wells Fargo Bank, N.A. ST: California IN: FIN SU: RTG PS -- NY058 -- 8902 05/24/95 11:59 EDT