The recent rating actions and warnings of Moody’s and Fitch are leading to banking stocks sliding lately. While the industry shows signs of stability following the crisis caused by bank failures earlier this year, investors are concerned about the negative stance of the rating agencies.

Given this backdrop, it could be worth watching JPMorgan Chase & Co. (JPM – Get Rating), Bank of America Corporation (BAC – Get Rating), and Wells Fargo & Company (WFC – Get Rating), which are majorly owned by smart money.

Before delving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the industry’s prospects.

On the positive side, considering the favorable job market data, interest rates are not expected to decline anytime soon. So, banks should be able to generate high-interest income.

On the other hand, the rating downgrade of 10 U.S. banks by Moody’s earlier this month and Fitch’s recent warning of banking giants’ potential rating downgrade raise significant concerns about the prospects of the U.S. banking system.

The rating downgrades could raise the cost of capital for banks, putting pressure on their margins. However, a high-interest rate environment could be supportive for banks.

Let’s take a closer look at the fundamentals of the featured stocks…

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