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Rating Action:

Moody's downgrades U.S. banks' hybrid securities ratings

17 Feb 2010

New York, February 17, 2010 -- Moody's Investors Service downgraded the ratings on certain U.S. banks' hybrid securities, in line with its revised Guidelines for Rating Bank Hybrids and Subordinated Debt, published in November 2009. This concludes the review for possible downgrade that began on November 18, 2009.

A full list of the individual securities affected can be accessed through this link:

http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBC_123250

Prior to the global financial crisis, Moody's had incorporated into its ratings an assumption that support provided by national governments and central banks for a troubled bank would, to some extent, benefit the holders of subordinated capital instruments as well as the senior creditors. The systemic support for these instruments has not been forthcoming in many cases. The above-mentioned revised guidelines largely remove previous assumptions of systemic support, resulting in today's rating action. In addition, this revised methodology generally widens the notching on a hybrid's rating that is based on the instrument's features.

RATING ACTION IN DETAIL

The starting point in Moody's revised approach to rating hybrid securities is the Adjusted Baseline Credit Assessment (Adjusted BCA) of the bank. The Adjusted BCA reflects the bank's stand-alone credit strength as expressed through its Baseline Credit Assessment (BCA) and includes uplift for parental and/or cooperative support, if applicable. The Adjusted BCA excludes systemic support. Most U.S. hybrid instruments are issued by the bank holding company. Therefore, an additional notch is typically incorporated to reflect the structural subordination of holding company creditors.

The characteristics of most U.S. junior subordinated debt instruments and non-cumulative preferred securities are somewhat standardized:

• The loss absorption for junior subordinated debt while the issuer remains a going concern stems from the cumulative deferral feature of its coupon. Coupon deferral is optional. These instruments have a junior subordinated claim in liquidation. These instruments are rated to the standard Adjusted BCA minus two notches, less another notch for structural subordination. If the holding company ratings incorporate systemic support, these instruments are rated to the standard Adjusted BCA minus one notch, less another notch for structural subordination.

• The loss absorption for non-cumulative preferred securities while the issuer remains a going concern stems from the non-cumulative deferral feature of their coupon. Coupon deferral is optional. Together with their deeply subordinated claim in liquidation, this means that, unless stated otherwise, these instruments are rated to the standard Adjusted BCA minus three notches, less another notch, if applicable, for structural subordination.

The following companies or their subsidiaries have at least one security affected by today's rating action:

1) American Express Company

2) Associated Banc-Corp

3) Astoria Financial Corporation

4) BancorpSouth, Inc.

5) Bank of New York Mellon Corporation (The)

6) BB&T Corporation

7) Compass Bancshares, Inc.

8) Capital One Financial Corporation

9) Charles Schwab Corporation (The)

10) Comerica Incorporated

11) Cullen/Frost Bankers, Inc.

12) Discover Financial Services

13) Fifth Third Bancorp

14) First Citizens BancShares, Inc.

15) First Horizon National Corporation

16) Fulton Financial Corporation

17) HSBC USA Inc.

18) Huntington Bancshares Incorporated

19) KeyCorp

20) M&T Bank Corporation

21) Northern Trust Corporation

22) Old National Bancorp

23) PNC Financial Services Group, Inc.

24) Raymond James Financial, Inc.

25) Regions Financial Corporation

26) Santander Holdings USA, Inc.

27) State Street Corporation

28) SunTrust Banks, Inc.

29) SVB Financial Group

30) TD Bank US Holding Company

31) U.S. Bancorp

32) Webster Financial Corporation

The outlook for all entities is negative, with some exceptions. The outlooks for Bank of New York Mellon Corporation and Northern Trust Corporation are stable. The ratings of Associated Banc-Corp and Webster Financial Corporation remain under review for possible downgrade.

The principal methodologies used in rating these securities were "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt" and "Frequently Asked Questions: Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt", published in November 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Barbara J. Havlicek
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades U.S. banks' hybrid securities ratings
No Related Data.
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