Five US Banks Downgraded by S&P Following Moody's Decision
S&P Global Ratings has lowered the credit ratings of five regional US banks by one level and indicated a negative outlook for several additional banks on Monday.
The ratings agency attributed the downgrades to the current challenging lending environment, affecting banks such as KeyCorp, Comerica Inc., Valley National Bancorp, UMB Financial Corp., and Associated Banc-Corp.
S&P's actions follow similar downgrades announced by Moody's just two weeks prior, which had disrupted financial markets. Moody's had also mentioned its review of credit ratings for larger banks like Bank of New York Mellon, State Street, and Northern Trust. Following the banking turmoil earlier in the year, stemming from Silicon Valley Bank's collapse, many regional banks have been compelled to offer higher interest rates on deposits to retain customers, thereby impacting their profitability. Despite these measures, numerous regional banks have struggled to prevent deposit outflows.
For example, S&P highlighted Comerica's $14 billion drop in average deposits from the second quarter of the prior year to this year as one factor contributing to its decision. The agency also pointed to Comerica's "relatively high proportion of commercial and uninsured deposits."
Similar issues were cited for the other four banks that experienced downgrades. In total, 90% of the banks assessed by S&P maintain stable outlooks, while the remaining 10% have been assigned negative outlooks. None of the banks carry positive outlooks, S&P reported on Monday.