Moody’s Downgrades US Banks Over Rising Costs And Office Exposure
08 Agosto 2023 - 10:28AM
IH Market News
Moody’s Investors Service has downgraded the credit ratings of
10 small and medium-sized U.S. banks and said it may downgrade
larger creditors, including the U.S. Bancorp (NYSE:USB) , Bank of
New York Mellon Corp (NYSE:BK), State Street Corp (NYSE:STT) and
Truist Financial Corp (NYSE:TFC), as part of a comprehensive review
of mounting pressures on the industry.
Higher financing costs, potential regulatory capital
deficiencies and rising risks linked to commercial real estate
lending amid weakening demand for office space are among the
tensions prompting the review, Moody’s said in a series of notes on
Monday.
“Collectively, these three events lowered the credit profile of
several US banks, although not all banks equally,” Moody’s wrote in
some of the ratings.
Among the companies that had their ratings cut were M&T Bank
Corp., Webster Financial Corp., BOK Financial Corp., Old National
Bancorp, Pinnacle Financial Partners Inc. and Fulton Financial
Corp.
Northern Trust Co. and Cullen/Frost Bankers Inc. are also being
analyzed for relegation.
In addition, Moody’s has adopted a “negative” outlook for 11
creditors, including PNC Financial Services Group, Capital One
Financial Corp., Citizens Financial Group Inc., Fifth Third
Bancorp, Regions Financial Corp., Ally Financial Inc., Bank OZK and
Huntington Bancshares Inc.
Investors, rocked by the collapse of a regional bank in
California and New York this year, have been watching closely for
signs of stress in the industry as rising interest rates force
companies to pay more for deposits and raise the cost of funding
from alternative sources. At the same time, these higher rates are
eroding banks’ asset values and making it harder for commercial
real estate borrowers to refinance their debt, which could weaken
lenders’ balance sheets.
“Rising funding costs and declining income metrics will erode
profitability, the first buffer against losses,” Moody’s wrote in a
separate note explaining the changes. “Asset risk is increasing,
particularly for small and medium-sized banks with large Commercial
Real Estate (CRE) exposures.”
Some banks have reduced loan growth, which preserves capital but
also slows the shift in their loan mix towards higher yielding
assets, Moody’s said.
Banks that rely on more concentrated or higher levels of
unsecured deposits are more exposed to these pressures, especially
banks with high levels of bonds and fixed-rate loans.
Truist Financial (NYSE:TFC)
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