FINANCIAL INSTITUTIONSISSUER COMMENT 29 April 2016RATINGSWELLS FARGO&COMPANY (WFC) Moodys SR Unsecured Rating A2Moodys Outlook STABond-Implied Rating A1CDS-Implied Rating A2EDF-Implied Rating A3As of April 27, 2016ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Wells Fargo&CompanyWells Fargo&Companys Bond-implied Rating Slips Lower Wells Fargos bond-implied rating deteriorated over the last three months. The decline in the implied-rating followed the FDIC and Fed rejection of WFCs living will as inadequate on April 12, and it must be rewritten for submission by October 1. On April 14, WFC reported first quarter results that included a decline in net income(YoY), a rise in loan loss provisions and a drop in net interest margin (please see discussion below). Despite beating the Wall Street consensus EPS estimate of 98 cents by a penny ($0.99), EPS was down from $1.04 in Q1 a year ago.The CDS- and EDF'-implied ratings both match their levels of 90 days ago.The bond-implied rating is A1 (Figure 1). Over the last three months it deteriorated by two notches from an apex of Aa2 for a few days in mid-April 2016. The Aa2 observation was the highest bond-implied rating seen over the last five years.The CDS-implied rating is A2 now, down identical to its level on January 27. Since then it has fluctuated often between A2 and A3. Wells Fargos five-year CDS mid-spread of 58 bp compares to such peers JP Morgan Chase (72 bp), Bank of America ( 90bp), Morgan Stanley (99 bp), Citigroup (90 bp), and Goldman Sachs (103 bp). We note that WFCs CDS have consistently traded tighter than these large banking peers over the last several years.The EDF'-implied rating is A3 and has been so for each daily observation over the last 90 days. It currently stands one n...
