KBRA Affirms Ratings for Wedbush Financial Services, LLC

KBRA affirms the issuer and senior unsecured debt ratings of BBB- for Los Angeles, California-based Wedbush Financial Services, LLC. Additionally, KBRA affirms the issuer rating of BBB for the primary operating subsidiary, Wedbush Securities Inc. ("Wedbush" or "the company"), which is registered as a broker-dealer with the SEC, a Futures Commission Merchant and Swap Dealer with the CFTC, as well as an SEC-registered RIA, a self-clearing member of NYSE and CME, and a member of FINRA. The Outlook for all ratings is Stable.

Key Credit Considerations

Wedbush’s ratings are supported by its entrenched position in correspondent clearing and favorable market presence in the futures business. Other business lines, which also reflect respectable scale, including retail wealth management, as well as investment banking, and institutional equities, contribute to revenue diversification, though performance in certain segments has lagged in recent years amid macro and rate-related headwinds—reflecting the inherent cyclicality of certain activities. KBRA views ongoing initiatives to improve segment-level accountability, refine capital allocation, and streamline operations as positive for enhancing efficiency and supportive of the company’s long-term credit profile.

Reported earnings performance has been pressured in recent years, partly due to elevated legal and regulatory expenses as well as some headwinds in global advisory services. However, excluding one-time items, Wedbush has demonstrated fairly stable core results, including a strong core pre-tax margin and ROE entering FY26. This performance is supported by ongoing efficiency initiatives, including cost reductions and operational streamlining, which, along with continued favorable market conditions, are expected to benefit its core franchises.

While the legal and regulatory compliance track record remains mixed, KBRA notes proactive efforts to strengthen oversight and expects such issues to be more limited going forward. Exposure to operational, liquidity, and credit risks is considered well-contained. The company maintains a comprehensive enterprise risk framework with robust controls, ongoing monitoring, and oversight. The balance sheet remains low risk, characterized by largely matched-book collateralized financing backed by high-quality securities and supported by daily margining and periodic counterparty reviews. Liquidity risk is mitigated by a conservative funding approach, ample excess net capital, and regular stress testing, all of which provide solid protection against market or client-driven funding pressures. Reported leverage remains somewhat above certain peers but is partly offset by the quality of the capital stack and a prudent balance sheet profile. Overall, KBRA views the company’s conservative approach to risk management as supported by its ownership composition that promotes long-term stability and prudent capital stewardship.

Rating Sensitivities

Given the Stable Outlook, upward rating movement in the near term is unlikely. However, ratings could move higher over time with continued improvement in profitability metrics, supported by execution of strategic initiatives, further strengthening of regulatory compliance and control frameworks, and a sustained reduction in financial leverage. Conversely, a meaningful shift in strategy or financial management resulting in a higher risk appetite, more aggressive liquidity practices, and/or a material increase in leverage could lead to a downgrade. Evidence of significant or prolonged performance pressure stemming from market challenges could also result in negative rating actions. In addition, continued earnings pressure from legal or regulatory matters would be viewed negatively from a credit perspective.

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