S&P downgrades multiple US banks on growing liquidity worries (updated)
22/08/2023 12:15
(Recasts throughout, adds background in paragraphs 5,6 and 9;
Changes dateline)
Aug 22 (Reuters) - S&P Global cut its credit ratings and
outlook on multiple U.S. regional banks on Monday, saying higher
funding costs and troubles in the commercial real estate (CRE)
sector would likely test their credit strength.
A sharp rise in interest rates by the U.S. Federal Reserve
is fueling liquidity concerns as costs tied to funding deposits
surge, the S&P said in a summarized note.
The agency cut its ratings on Associated Banc-Corp ASB.N
and Valley National Bancorp VLY.O on funding risks and higher
reliance on brokered deposits, while UMB Financial Corp
UMBF.O , Comerica Bank CMA.N and KeyCorp KEY.N were
downgraded on large deposit outflows and prevailing higher
interest rates.
KeyCorp shares were down marginally in premarket trading.
The outlook of S&T Bank and River City Bank was cut to
"negative" from "stable" by the S&P, citing higher CRE exposure.
The agency's action will make borrowing costlier for the
ailing banking sector that is looking to shake off the effects
of the crisis from earlier this year, when the collapse of
Silicon Valley Bank and Signature Bank sparked a loss of
confidence and led to a run on deposits at several regional
lenders.
Borrowing costs globally have also surged, with the U.S.
Treasury yields hitting their highest in 16 years as the bond
market rout
entered its sixth week on Tuesday
, even as U.S. stock index futures gained, boosted by
megacap growth stocks.
Moody's had earlier this month cut its ratings on 10 U.S.
banks by a notch and placed six, 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.
An analyst at Fitch, the last of the three chief rating
agencies, also told CNBC last week that several U.S. banks,
including JPMorgan Chase JPM.N , could see downgrades if the
sector's "operating environment" were to deteriorate further.
(Reporting by Gokul Pisharody and Niket Nishant in Bengaluru;
Additional reporting by Akanksha Khushi; Editing by Varun H K,
Pooja Desai and Anil D'Silva)
((Gokul.Pisharody@thomsonreuters.com;))