S&P downgrades multiple US banks citing 'tough' operating conditions
22/08/2023 03:16
Aug 21 (Reuters) - S&P Global on Monday cut credit
ratings and revised its outlook for multiple U.S. banks,
following a similar move by Moody's, warning that funding risks
and weaker profitability will likely test the sector's credit
strength.
S&P downgraded the ratings of Associated Banc-Corp ASB.N
and Valley National Bancorp VLY.O on funding risks and a
higher reliance on brokered deposits.
It also downgraded UMB Financial Corp UMBF.O , Comerica
Bank CMA.N and Keycorp KEY.N , citing large deposit outflows
and prevailing higher interest rates.
A sharp rise in interest rates is weighing on many U.S.
banks' funding and liquidity, S&P said in a summarized note,
adding that deposits held by Federal Deposit Insurance Corp
(FDIC)-insured banks will continue to decline as long as the
Federal Reserve is "quantitatively tightening."
The rating agency also downgraded the outlook of S&T Bank
and River City Bank to negative from stable on high commercial
real estate (CRE) exposure among other factors.
Moody's had earlier this month cut the ratings of 10 banks
by one notch and placed six banking giants, including Bank of
New York Mellon BK.N, US Bancorp USB.N , State Street STT.N
and Truist Financial TFC.N on review for potential downgrades.
The collapse of Silicon Valley Bank and Signature Bank
earlier this year sparked a crisis of confidence in the U.S.
banking sector, leading to a run on deposits at a host of
regional banks, despite authorities launching emergency measures
to shore up confidence.
(Reporting by Gokul Pisharody in Bengaluru; Additional
reporting by Akanksha Khushi; Editing by Varun H K)
((Gokul.Pisharody@thomsonreuters.com;))