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Wells Fargo Profits Become 'Ratings Driver'

Wells Fargo's profitability throughout most of the financial crisis may result in a ratings bump from Moody's.



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Wells Fargo's

(WFC) - Get Wells Fargo & Company Report

profitability throughout most of the financial crisis may result in a ratings bump from


(MCO) - Get Moody's Corporation Report


The ratings agency said on Thursday that the San Francisco-based bank's "unsupported" ratings - those guaranteed by the holding company - are under review for possible upgrades.

Moody's cited "ongoing, very high systemic support for Wells Fargo" in its decision and said that deposit, senior debt and senior subordinated debt ratings would all "get a lift." Currently, those items are rated Aa2, Aa2 and Aa3, respectively.

"Wells Fargo is now in a better position to absorb expected losses from its business activities," Moody's said in a press release. "While tangible equity ratios declined appreciably after its acquisition of Wachovia in December 2008, they have since noticeably improved due to sizable equity issuances and greater-than-expected earnings in the past six quarters."

Moody's Senior Vice President Sean Jones noted heightened concerns about the economy in the near term. However, Wells' track record of outperformance during adverse economic conditions is "a ratings driver," he said.

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Wells has a reputation for generating strong "core" earnings, particularly through its giant mortgage-servicing division. The bank only posted one loss throughout the financial crisis, during the fourth quarter of 2008, when it took big write-downs on Wachovia's bad assets.

By mid-afternoon, Wells Fargo shares were tracking 1.7% higher at $25.64, amid a broader bank-stock rally.

--Written by Lauren Tara LaCapra in New York.

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