New York, March 08, 2010 -- Moody's Investors Service downgraded the ratings of Webster Financial
Corporation (senior debt to Baa1 from A3) and the ratings of its lead
bank subsidiary, Webster Bank, N.A. (bank financial
strength to C from C+; long- term deposits to A3 from
A2; and short-term deposits to Prime-2 from Prime-1).
This concludes the review for possible downgrade initiated on November
19, 2009. Following the downgrade, the rating outlook
is stable. Webster Financial Corporation and its subsidiaries are
referred to hereafter as 'Webster'.
The downgrade resulted from Webster's protracted weakness in profitability
and asset quality. Webster's core profitability has been
weighed down by a lower net interest margin and higher expenses,
combined with elevated credit costs. In Moody's view,
higher credit costs associated with the company's commercial and
industrial and real estate lending activities are likely to persist for
several periods. Webster has made progress in addressing core pre-provision
profitability issues through a series of strategic initiatives,
including ceasing new originations in its more problematic portfolios.
However, Moody's does not expect these improvements to be
sufficient to generate more robust profitability.
Following the downgrade, the rating outlook is stable as a result
of Webster's capital and liquidity resources, which should
enable it to manage through the economic cycle, even if conditions
worsen. The rating agency noted the improvement in Webster's
capital position, particularly its tangible common equity (TCE)
relative to risk-weighted assets. TCE has been strengthened
by approximately $312 million of common equity obtained through
investments from Warburg Pincus and the exchange of preferred securities
in 2009. Liquidity at both the bank and holding company is robust.
The balance sheet is primarily core funded. The holding company
maintains liquid assets to meet several years of obligations without dividends
from the bank.
The rating agency also commented on the implications of the company's
potential repayment of the remaining $300 million of preferred
stock outstanding under the TARP Capital Purchase Program. Moody's
said that repayment, if not accompanied by some common equity issuance,
could reduce the ample liquidity and capital cushions of Webster,
which currently temper the likelihood of downward rating action.
Therefore, repayment of TARP without a capital issuance could lead
to a change in Moody's stable outlook or its ratings.
Moody's last rating action on Webster was on February 17, 2010 when
its hybrid securities and shelves were downgraded as part of the implementation
of Moody's updated guidelines for rating bank hybrid securities.
The principal methodologies used in rating Webster were Moody's "Bank
Financial Strength Ratings: Global Methodology", published
in February 2007, and "Incorporation of Joint-Default Analysis
into Moody's Bank Ratings: A Refined Methodology", published
in March 2007, 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 this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Webster Financial Corporation is a bank holding company headquartered
in Waterbury, Connecticut, with reported assets of $17.7
billion as of December 31, 2009.
Downgrades:
..Issuer: Webster Bank N.A.
....Bank Financial Strength Rating,
Downgraded to C from C+
....Issuer Rating, Downgraded to A3
from A2
....OSO Rating, Downgraded to P-2
from P-1
....Deposit Rating, Downgraded to P-2
from P-1
....OSO Senior Unsecured OSO Rating,
Downgraded to A3 from A2
....Subordinate Regular Bond/Debenture,
Downgraded to Baa1 from A3
....Senior Unsecured Deposit Rating,
Downgraded to A3 from A2
..Issuer: Webster Capital Trust IV
....Preferred Stock Preferred Stock,
Downgraded to Baa3 from Baa2
....Preferred Stock Shelf, Downgraded
to (P)Baa3 from (P)Baa2
..Issuer: Webster Capital Trust V
....Preferred Stock Shelf, Downgraded
to (P)Baa3 from (P)Baa2
..Issuer: Webster Capital Trust VI
....Preferred Stock Shelf, Downgraded
to (P)Baa3 from (P)Baa2
..Issuer: Webster Financial Corporation
....Issuer Rating, Downgraded to Baa1
from A3
....Multiple Seniority Shelf, Downgraded
to (P)Baa1, (P)Baa2, (P)Baa3, (P)Baa3, (P)Ba1
from (P)A3, (P)Baa1, (P)Baa2, (P)Baa2, (P)Baa3
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa1 from A3
Outlook Actions:
..Issuer: Webster Bank N.A.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Webster Capital Trust IV
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Webster Capital Trust V
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Webster Capital Trust VI
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Webster Financial Corporation
....Outlook, Changed To Stable From
Rating Under Review
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Rita Sahu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Webster Financial (senior to Baa1)