Moody's reviews US regional bank ratings
New York, March 12, 2009 -- Moody's Investors Service announced that it is reviewing for possible
downgrade the bank financial strength ratings (BFSR) of 23 US regional
banks and the deposit and debt ratings of 17 of these same institutions.
The difference between these two figures is explained primarily by Moody's
expectation of higher systemic support for certain institutions which
would mitigate bank-level deposit and debt ratings downgrades.
At the same time, Moody's has changed the rating outlook to
negative from stable on 19 other banks. Moody's expects to
complete all of its reviews by mid-May.
Today's actions reflect Moody's view that the current housing and
economic crisis will lead to significantly higher credit losses than previously
anticipated. Although Moody's has been incorporating expected losses
on bank loan and security portfolios into its ratings for some time,
the sharp decline in commercial real estate prices, increased corporate
default expectations, and unabated deterioration in residential
loan performance has led Moody's to considerably increase its loss expectations.
"These losses are likely to meaningfully weaken the capital position
of many banks in 2009," says Managing Director Robert Young.
The banks that are likely to be most affected by the outcome of the ratings
reviews are those with significant risk concentrations in commercial real
estate, specifically construction and land development.
"In today's environment, it is extremely difficult for
banks to generate capital, both internally through earnings and
externally through private sources," says Mr. Young.
"Because of this, low capital levels are an increasing threat
to banks' sustainability. Therefore, capital has become
more important to Moody's assessment of banks' stand-alone
financial strength."
Moody's BFSR methodology remains unchanged, though the weight
attached to certain rating considerations, particularly capital
and future earnings prospects, has been increased to better reflect
the current crisis. The refinement to Moody's approach to
rating banks in this environment is discussed in a Special Comment titled
"Calibrating Bank Ratings in the Context of the Global Financial Crisis",
which was published in February.
Moody's reviews are also prompted by an overall worsening of expected
economic scenarios and the rating agency's upwardly revised loss
estimations on both residential and commercial real estate loans.
"The current operating environment is quite similar to the most
challenging risk scenario we evaluated as part of our US Banking System
Outlook in June 2008," says Mr. Young. "Under
that scenario, we had anticipated the greatest amount of ratings
movement, including selective multi-notch downgrades."
In addition to an assessment of the deterioration in commercial and residential
real estate loans, as well as commercial and industrial loans,
the review of each bank will include a consideration of the characteristics
of its investment portfolio, focusing particularly on non-agency
RMBS securities and investments in bank trust preferred securities.
SUPPORT ASSUMPTIONS EXPANDED TO MORE US BANKS
Moody's also highlighted the increased probability of systemic support
for large regional banks.
"Given the US government's specific focus on banks with more
than $100 billion in assets," Mr. Young states,
"we now regard the probability of government support for these large
regional banks as being greater than had been anticipated."
To this point, only three regional banks -- U.S.
Bancorp, PNC and SunTrust -- previously were considered by
Moody's to be potential recipients of government support,
but at a level insufficient to impact their ratings. Today,
following the clear demonstration of support by regulatory authorities,
Moody's believes that the probability of support has increased for
an additional five institutions: BB&T, Capital One,
KeyCorp, Fifth Third and Regions.
The result for these eight regional banks is that, should any of
their BFSRs be downgraded, the increased probability of systemic
support could temper the extent of a downgrade, if any, of
their bank-level deposit and debt ratings.
During its review process, Moody's will also consider the
potential for systemic support for smaller regional banks.
THREE RATING ACTION CATEGORIES
Moody's rating actions can be divided into three broad categories:
- Banks that were placed on review for possible downgrade
- Banks that had their outlook changed to negative, or that
remain on negative outlook
- Banks that were affirmed with a stable outlook.
Because of the extensive number of issuers included in this press release,
the lists below include only the names of the rated bank holding companies.
A complete list of ratings that were placed under review for possible
downgrade and other entities that were affected by today's actions
may be found at:
Excel: http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBC_115224
REVIEWS FOR DOWNGRADE
Moody's placed the BFSRs of 23 US banks under review for possible
downgrade. Moody's also placed the deposit and debt ratings
of 17 of these same institutions under review. The difference between
the two figures results from the influence of potential systemic or parental
support on six banks (namely BB&T, BancWest, Capital One,
KeyCorp, PNC, and U.S. Bancorp). In these
instances, the banks' BFSRs were placed under review,
but the deposit and debt ratings (which benefit from support) were affirmed,
though with a negative outlook.
Banks that were placed on review for possible downgrade or that were already
on review, and where it is expected that at least one rating (BFSR,
bank deposit/debt, or holding company debt) could be downgraded
by up to one notch, include --
Astoria Financial Corporation
BancWest Corporation
BB&T Corporation
BMW Bank of North America
Capital One Financial Corp.
Citizens Republic Bancorp, Inc.
First Citizens BancShares, Inc.
Fulton Financial Corporation
KeyCorp
M&T Bank Corporation
Pacific Capital Bancorp
PNC Financial Services Group, Inc.
South Financial Group, Inc. (The)
Susquehanna Bancshares, Inc.
Trustmark Corporation
U.S. Bancorp
United Bankshares, Inc.
Banks that were placed on review for possible downgrade or that were already
on review, and where it is expected that at least one rating (BFSR,
bank deposit/debt, or holding company debt) could be downgraded
by up to two notches, include --
Fifth Third Bancorp
Huntington Bancshares Incorporated
SunTrust Banks, Inc.
Synovus Financial Corp.
UCBH Holdings, Inc.
UnionBanCal Corporation
Western Alliance Bancorporation
Wilmington Trust Corporation
Banks that were placed on review for possible downgrade or that were already
on review, and where it is expected that at least one rating (BFSR,
bank deposit/debt, or holding company debt) could be downgraded
by two or more notches, include --
BBVAPR Holding Corporation
Colonial BancGroup, Inc. (The)
Compass Bancshares, Inc.
Zions Bancorporation
NEGATIVE OUTLOOKS
The capital positions and earnings prospects of the banks that had their
outlook changed to negative, or that are already on negative outlook
remain broadly in line with their current ratings under Moody's
revised loss assumptions. However, the negative outlooks
reflect the fact that these institutions' ratings could still come
under pressure if loss assumptions increase significantly from current
levels, or if other aspects of their portfolios, beyond those
related to real estate, deteriorate to the degree that capital and
earnings are affected.
Banks that had their outlook changed to negative or that remain on negative
outlook include --
American Savings Bank, FSB
Associated Banc-Corp
BancorpSouth, Inc.
Bank of Hawaii Corporation
BOK Financial Corporation
Citizens Financial Group, Inc.
City National Corporation
Comerica Incorporated
Commerce Bancshares, Inc.
Cullen/Frost Bankers, Inc.
First Horizon National Corporation
First Midwest Bancorp, Inc.
First National of Nebraska, Inc.
FirstMerit Corporation
Hancock Holding Company
Harris Financial Corp. (the outlook on the lead bank's BFSR was
changed to negative from stable; a stable outlook was maintained
on all other ratings)
HSBC USA Inc.
Hudson Valley Holding Corp.
Independent Bank Corporation
Integra Bank Corporation
Marshall & Ilsley Corporation
Old National Bancorp
Popular, Inc.
RBC Bancorporation (USA) (the outlook on the lead bank's BFSR is stable;
the outlook on all other ratings is negative)
Santander Bancorp
Sovereign Bancorp, Inc.
State Street Corporation
SVB Financial Group
TCF Financial Corporation
TD Banknorth Inc
Valley National Bancorp
Webster Financial Corporation
Whitney Holding Corporation
STABLE OUTLOOKS
Banks that were affirmed with a stable outlook are those institutions
that can absorb a level of stress beyond Moody's expected loss assumptions
and remain appropriately capitalized at their current rating level.
Banks that were affirmed with a stable outlook include --
Amarillo National Bancorp, Incorporated
Bank of New York Mellon Corporation (The)
Doral Financial Corporation
FirstBank Puerto Rico
INTRUST Financial Corporation
New York Community Bancorp, Inc.
Northern Trust Corporation
People's United Financial Inc.
Prudential Bank & Trust, FSB
Regions Financial Corporation (the outlook on the lead bank's deposit
and debt ratings was changed to stable from negative; a negative
outlook was maintained on all other ratings)
UMB Financial Corporation
The principal methodologies used in rating these issuers were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating these issuers can also
be found in the Credit Policy & Methodologies directory.
"To further discuss these actions Moody's will hold a teleconference on
Friday, March 13th beginning at 10:00 AM EDT/14:00 GMT/15:00
CET. To register and for additional information, please visit
www.moodys.com/events."
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sean Jones
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
