• We believe the heightened market volatility in the wake of recent bank failures has shown that despite many of the positive enhancements made to bank regulation in the U.S., challenges can still arise in the banking industry. We have therefore reduced our upside expectations for bank ratings in the near term.
• Furthermore, with inflation still elevated, our economists also see higher uncertainty and greater downside risk in the economic outlook.
• We have changed our view of industry risk in the U.S. banking sector to stable from positive, indicating that we do not expect to revise up the 'bbb+' anchor--the starting point for our ratings on banks in the U.S.--in the next two years.
• We have revised our outlooks to stable from positive on the ratings on four large U.S. banks as we believe prevailing market and economic conditions have reduced the probability of an upgrade in the current environment. At the same time, we affirmed the ratings on the banks, reflecting their continued good performance on a stand-alone basis, including through the recent market volatility.

NEW YORK (S&P Global Ratings) March 31, 2023--S&P Global Ratings today said it has revised to stable from positive its outlooks on the ratings on Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), The PNC Financial Services Group Inc. (PNC), and Truist Financial Corp. (TFC). At the same time, we affirmed our ratings on the banks (see the "Ratings List" below).

The outlook revisions follow market volatility in the wake of some recent bank failures, which have shown that challenges can still arise in the banking industry despite many positive changes over the past decade.   We view the heightened market volatility as a negative for the banking sector and a reminder of the industry's confidence sensitivity. Significant movements in monetary policy and interest rates have made managing interest rate risk for banks more challenging. On the positive side, we believe emergency actions from the Federal Reserve and other regulators in March have equipped the banking industry with significant access to liquidity if needed, supported confidence, and reduced risk related to unrealized losses on securities.

With inflation still elevated, we also see uncertainty and downside risk in the economic outlook.   Our economists expect the U.S. to have a shallow recession this year, but they also believe the odds of a hard landing have increased. If the economy suffers more than a shallow recession, asset quality in the banking sector could deteriorate and banks could see higher market and credit losses.

Because of those factors, our forward-looking view of industry risk in the U.S. banking sector has shifted to stable from positive.   This indicates that we do not expect to revise up the 'bbb+' anchor--the starting point for our ratings on banks in the U.S.--in the next two years. We use our analysis of economic and industry risk as part of our Banking Industry Country Risk Assessment (BICRA) to set the anchor for U.S. rated banks. As of today, more than 90% of our U.S. bank ratings portfolio has stable outlooks.

Our ratings affirmations and stable outlooks on BAC, JPM, PNC, and TFC reflect our view of the credit resilience and favorable performance of these banks, including through the recent volatility.   Recent events have not lowered our view of the creditworthiness of BAC, JPM, PNC, or TFC. Should industry and economic conditions improve, we will consider those changes and the stand-alone performance of these banks in the ratings and outlooks.

We will also consider any changes to regulation that could help support industry stability in the future.   Regulators have indicated they are considering several updates to regulation, including implementing enhanced regulatory capital requirements that align with the final set of Basel 3 standards. The Federal Reserve also last year issued an advanced notice of proposed rulemaking to solicit public feedback on requiring large regional banks, including PNC and TFC, to hold an extra layer of loss-absorbing capacity. Should regulators propose additional meaningful changes to bank regulation in the wake of recent events, we will also consider the credit impact of such potential changes.

Bank of America Corp.

Primary analyst: Brendan Browne

We affirmed our ratings on Bank of America Corp. and several subsidiaries and revised the outlook on those ratings to stable from positive.

With inflation still elevated and heightened market volatility, we believe uncertainty about the path of the economy has increased, reducing the likelihood that we will raise our issuer credit rating on BAC in the current environment.

That said, the ratings on BAC continue to incorporate its highly diverse business model with strength in numerous consumer and commercial banking, capital markets, and wealth management businesses. It also has demonstrated conservative risk management over many years and has a top deposit franchise across the U.S. As a global systemically important bank, BAC also remains under the most stringent regulation that applies to U.S. banks. We also continue to look favorably on BAC's good performance with solid earnings, asset quality, liquidity, and capital.

Outlook

The stable outlook on BAC reflects our expectation that the bank will continue to perform well and navigate risks in the economy over the next two years. We expect it to operate with good capital, liquidity, and asset quality, and prudent risk management.

Downside scenario.  We could lower the ratings if:

• BAC has a material worsening in asset quality or higher counterparty or operational losses; or
• The bank takes on significantly more risk, perhaps to boost profitability.

Upside scenario.  We could raise the ratings if:

• Downside risks to the economy ebb;
• BAC's asset quality remains in good shape, as measured by criticized loans, nonperforming assets, and net charge-offs;
• It generates reasonably good earnings;
• It maintains solid capital; and
• It maintains its low-risk posture in its strategy and financial management.

Ratings score snapshot

ESG credit indicators: E-2, S-2, G-2 

JPMorgan Chase & Co.

Primary analyst: Stuart Plesser

We affirmed our ratings on JPM and several subsidiaries and revised the outlook on those ratings to stable from positive. With inflation still elevated and heightened market volatility, we believe uncertainty about the path of the economy has increased, reducing the likelihood that we will raise our issuer credit rating on JPM in the current environment.

That said, the ratings on JPM continue to reflect its superior business model, in which it has consolidated market share across multiple loan types and services and demonstrated solid resilience to varied economic conditions. In addition, we think JPM, which has a leading deposit franchise, has benefited disproportionately from secular trends in the banking sector owing to its scale and resources, including business consolidation and technological advancement. As a global systemically important bank, it also remains under the most stringent regulation that applies to U.S. banks. We continue to look favorably on JPM's good performance with solid earnings, asset quality, liquidity, and capital.

Outlook

The stable outlook on JPM and its operating subsidiaries reflects our expectation that the company will continue to perform well and navigate risks in the economy over the next two years. We expect it to generate stable earnings and maintain adequate asset quality metrics, well managed counterparty exposure, and good balance sheet metrics.

Downside scenario.  We could lower the ratings if:

• JPM has a material worsening in asset quality or higher counterparty or operational losses; or
• The bank takes on significantly more risk than peers perhaps in an effort to boost profitability.

Upside scenario.  We could raise our ratings on the company if:

• Downside risks to the economy ebb;
• JPM continues to demonstrate good financial performance while maintaining a prudent risk posture and adequate resilience buffers;
• Its financial performance remains in the top tier compared with peers as measured by risk-adjusted profitability and efficiency;
• JPM controls well its credit and market risk with no appreciable increase in risk appetite, as demonstrated by asset quality ratios and market risk metrics; and
• JPM maintains good credit reserves, robust liquidity, and solid capital.

Ratings score snapshot

ESG credit indicators: E-2, S-2, G-2 

The PNC Financial Services Group Inc.

Primary analyst: Rian Pressman

We affirmed our ratings on The PNC Financial Services Group and its bank subsidiary and revised the outlook on those ratings to stable from positive. With inflation still elevated and heightened market volatility, we believe downside risks to the economy have increased, reducing the likelihood that we will raise our issuer credit rating on PNC in the current environment.

That said, the ratings on PNC continue to reflect its leading market position as one of the largest regional U.S. commercial bank holding companies, with strong competitive market positions. Other credit strengths include its historically good asset quality supported by conservative lending policies and avoidance of higher-risk loan categories, as well as its substantial contribution to revenue from diverse sources of noninterest income.

Partly offsetting factors include its concentration in commercial lending and financial return and efficiency metrics that historically have been somewhat weaker than large regional bank peers.

Outlook

Our stable outlook on PNC is based on our expectation that the company will exhibit resilient asset quality metrics, a strong balance sheet, and adequate earnings over the next two years--despite heightened banking industry volatility and some downside risks to the economy. In addition, our ratings on PNC--which are commensurate with some of the best-performing regional banks in the U.S.--already reflect the company's strengths, including its expanded market positions because of its acquisition of BBVA USA in 2021.

Downside scenario.  We could lower the ratings if we believe management's risk appetite has increased or if asset-quality performance deteriorates to a level inconsistent with PNC's good historical track record. We could also lower the ratings if any unanticipated risks arise, perhaps because of the acquisition of BBVA USA or as a result of management's organic growth initiatives.

Upside scenario.  We could raise the ratings on PNC if downside risks to the economy ebb and it demonstrates financial performance and business stability that are commensurate with higher-rated peers. Changes in regulation could also support a higher rating if we believed these changes would result in PNC having higher capital ratios and liquidity or potentially additional loss-absorbing capacity.

Ratings score snapshot

ESG credit indicators: E-2, S-2, G-2 

Truist Financial Corp.

Primary analyst: Robert Hansen

We affirmed our ratings on Truist Financial Corp. and its subsidiary bank and revised the outlook on those ratings to stable from positive. With inflation still elevated and heightened market volatility, we believe downside risks to the economy have increased, reducing the likelihood that we will raise our issuer credit rating on TFC in the current environment.

That said, we believe TFC's geographic and business diversity, strong competitive market position, and solid earnings power provide the company with a sustainable competitive advantage over most regional peers. We view declines in TFC's capital ratios over the past two years from elevated levels somewhat cautiously, but we expect capital ratios to increase modestly over the near to medium term. We also expect asset quality to gradually normalize amid weaker economic conditions.

Outlook

Downside scenario.  We could lower the ratings if the company's asset quality deteriorates more than we expect or if capital ratios decline and remain below levels that we view as adequate. We could also lower the rating if overall financial performance weakens to levels that are no longer comparable to similarly rated peers.

Upside scenario.  We could raise the ratings on TFC if downside risks to the economy ebb and it demonstrates financial performance and business stability that are commensurate with higher-rated peers. Changes in regulation could also support a higher rating if we believed these changes would result in TFC having higher capital ratios and liquidity or potentially additional loss-absorbing capacity.

Ratings score snapshot

ESG credit indicators: E-2, S-2, G-2 

BICRA Score Snapshot

U.S.

Related Criteria

• General Criteria: Hybrid Capital: Methodology And Assumptions, March 2, 2022
• Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
• Criteria | Financial Institutions | General: Financial Institutions Rating Methodology, Dec. 9, 2021
• General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
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• Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
• General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
• General Criteria: Guarantee Criteria, Oct. 21, 2016
• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
• General Criteria: Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010

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• Rating Component Scores For U.S., Canadian and Bermudian Banks, Dec. 30, 2022
• How Unrealized Losses On Securities Affect U.S. Bank Ratings, Dec. 13, 2022
• Potential Rating Implications Of The Proposed Rules To Resolve Large U.S. Regional Banks, Oct. 24, 2022
• Comparative Statistics: U.S. Banks, Oct. 12, 2022

Ratings List