This week, Moody’s cut the credit ratings of ten US banks and warned it is watching some of the nation’s biggest lenders for potential downgrades.
The outlook shows that the industry still faces pressure after the banking crisis that started in March with the sudden collapse of Silicon Valley Bank, once the nation’s 16th largest bank, when depositors grew fearful of the bank’s solvency and made a classic bank run. Signature Bank and First Republic Bank soon followed, leading to more concerns about the banking industry’s stability.
Concern over the sector has waned after second-quarter results showed most banks stabilized deposit levels following steeper losses during the March regional bank crisis. But a new issue may cast a pall over small and midsize banks: They’ve been forced to pay customers more for deposits at a pace that outstrips growth in what they earn from loans.
“Banks kept their deposits, but they did so at a cost,” said Ana Arsov, global co-head of banking for Moody’s Investors Service and a co-author of the downgrade report. “They’ve had to replace it with funding that’s more expensive. It’s a profitability concern as deposits continue to leave the system.”
A lower credit rating could push funding costs for these banks even higher.
List of Downgraded Banks
Here’s the list of banks downgraded:
- Commerce Bancshares
- BOK Financial Corporation
- M&T Bank Corporation
- Old National Bancorp
- Prosperity Bancshares
- Amarillo National Bancorp
- Webster Financial Corporation
- Fulton Financial Corporation
- Pinnacle Financial Partners
- Associated Banc-Corp
Banks with Ratings Under Review
Here’s the list of banks under review for possible downgrades:
- Bank of New York Mellon Corporation
- Northern Trust Corporation
- State Street Corporation
- Cullen/Frost Bankers
- Truist Financial Corporation
- U.S. Bancorp
Banks With Negative Outlooks
The credit rating agency also said it shifted the outlook on the following 11 banks from stable to negative:
- PNC Financial Services Group
- Capital One Financial Corporation
- Citizens Financial Group
- Fifth Third Bancorp
- Huntington Bancshares
- Regions Financial Corporation
- Cadence Bank
- F.N.B Corporation
- Simmons First National Corporation
- Ally Financial
- Bank OZK
US stocks sank on the news. The Dow ended Tuesday’s session 159 points, or 0.5% lower. The S&P 500 declined 0.4%, and the Nasdaq lost 0.8%.
Bank stocks in particular fell on the news. Wells Fargo lost 1.3%, JPMorgan Chase 0.6% and Bank of America 1.9%, among others.
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