Moody’s lowered the ratings of 10 regional banks in the U.S. It also put six banks on review. Following the rating cut late Monday, many banks that were affected by the new rating saw a fall in share price. The rating company also projected a negative outlook for 11 financial institutions whose shares also tumbled. Moody’s changed their assessment of a total of 27 banks.
Some of the banks that saw a lower by one rung rating include the following
M&T Bank Corp.
Pinnacle Financial Partners
Commerce Bancshares
Prosperity Bank
BOK Financial Corp and others.
Some of the banks under review for a possible downgrade include
Bank of New York Mellon
Northern Trust
State Street
US Bancorp
Truist Financial
Cullen/Foster Bankers and others.
Some of the banks that have a negative outlook rating include
Capital One
Fifth Third Bancorp
Citizen Financials and others.
Moody’s said that the review was undertaken due to three factors:
higher funding costs
potential regulatory capital weaknesses and
risks associated with commercial real estate.
The rating company said that these were the factors that were responsible for the lowered ratings. However, not all of the banks had been affected equally.
Early in 2023, two major regional banks in the U.S.—Silicon Valley Bank and Signature Bank collapsed after investors made a run-on deposit, although authorities tried to stem the lack of confidence in regional banks. In Europe Credit Suisse was bought over by its rival UBS to prevent its collapse.
In a separate note, Moody’s also clarified the rating saying that rising funding costs and declining income metrics would erode profitability, which is the first buffer against losses. It also noted that asset risk has been rising particularly for small and midsize banks that had large CRE exposures.
The rating agency said that although some banks had cut short the growth of loans, in a bid to have capital reserves, this would also slow the shift in their loan mix towards assets that have high yields.
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