New York, May 17, 2018 -- Moody's Investors Service affirmed the ratings of Webster Financial Corporation
and its bank subsidiary, Webster Bank N.A. (together
referred to as Webster), and maintained its stable outlook.
Webster Bank is rated A1/Prime-1 for long- and short-term
deposits. Its standalone baseline credit assessment (BCA) is a3
and its counterparty risk assessments are A2(cr)/Prime-1(cr).
Webster Financial Corporation has a long-term issuer rating and
a senior unsecured rating of Baa1. The outlook is stable.
Moody's also assigned prospective ratings to Webster Financial Corporation's
shelf registration. The shelf was rated (P)Baa1 for senior unsecured,
(P)Baa1 for subordinate, (P)Baa2 for cumulative preferred stock
and (P)Baa3 for non-cumulative preferred stock.
Assignments:
..Issuer: Webster Financial Corporation
....Senior Unsecured Shelf, Assigned
(P)Baa1
....Subordinate Shelf, Assigned (P)Baa1
....Pref. Stock Shelf, Assigned
(P)Baa2
....Pref. Stock Non-cumulative
Shelf, Assigned (P)Baa3
Affirmations:
..Issuer: Webster Bank N.A.
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Baseline Credit Assessment, Affirmed
a3
.... Long term Counterparty Risk Assessment,
Affirmed A2(cr)
.... Short term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long term Deposit Rating, Affirmed
A1, stable
.... Short term Deposit Rating, Affirmed
P-1
.... Issuer Rating, Affirmed Baa1,
stable
..Issuer: Webster Financial Corporation
.... Issuer Rating, Affirmed Baa1,
stable
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa1, stable
....Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
Outlook Actions:
..Issuer: Webster Bank N.A.
....Outlook, Remains Stable
..Issuer: Webster Financial Corporation
....Outlook, Remains Stable
RATINGS RATIONALE
The affirmation reflects Webster's sustainable business model and
our view that it will maintain its overall good credit metrics.
Webster's key credit strengths are its strong liquidity profile
and firm asset quality metrics. Webster's capital ratios,
while sufficient and at the level of the similarly-rated peer median,
currently limit upward rating pressure. The assigned shelf ratings
follow Moody's notching practices for US regional banks incorporating
its loss-given-failure analysis.
Webster's strong liquidity profile is supported by its core deposit
base which more than fully funds its loan portfolio accounting for 116%
of gross loans. Its deposit base is a function of its market share
in its home state of Connecticut and is supplemented by its health savings
account (HSA) business. Deposit growth, primarily in its
HSA deposit business, coupled with a slowdown in loan growth has
contributed to a reduced reliance on market funding, accounting
for 9.6% of tangible banking assets at year-end 2017
down from 15.6% a year prior. Although the HSA business
results in some deposit concentration, it is mitigated by Webster's
comparatively large holding of liquid assets, which account for
25% of tangible banking assets.
Webster's asset quality metrics are strong with problem loans accounting
for 1.5% of total loans at the end of the first quarter
and performing TDRs make up 53% of problem loans. Positively,
Webster's loan growth has slowed. In 2017, Webster
grew its total loan portfolio 3% down from 9% in 2016.
Nonetheless, its above-average loan growth came at a time
of industry-wide weakening in underwriting standards. Webster's
lack of industry concentration somewhat mitigated its above-average
growth.
Webster's profitability has benefited from rising interest rates
resulting in an improved net interest margin of 3.44% in
the first quarter 2018, up from 3.22% in first quarter
2017. Webster's profitability profile is dependent on spread
income, with net interest income accounting for three quarters of
revenue, and its balance sheet remains asset-sensitive.
As such, increases in short-term interest rates will continue
to benefit profitability.
Regarding capital, Webster's Moody's adjusted tangible
common equity as a percentage of risk-weighted assets was 10.9%
at year-end 2017, in line with the similarly-rated
peer median. However, its current capital levels limit upward
rating pressure.
What Could Change the Rating Up
Upward pressure could emerge if the bank demonstrated a sustained improvement
in capital and an above-average asset quality performance.
What Could Change the Rating Down
Aggressive capital actions and a reduction in liquid banking assets could
result in a downward movement in its standalone BCA.
The principal methodology used in these ratings was Banks published in
April 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Megan Fox
AVP-Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
