Ratings of four banks placed on review for downgrade; outlooks of two additional banks changed to negative
New York, February 16, 2016 -- Moody's Investors Service has taken negative rating actions on six
US regional banking groups with comparatively high energy-lending
concentrations. The long-term ratings, standalone
baseline credit assessments (BCA), adjusted BCAs, and long-term
Counterparty Risk (CR) Assessments of the following four banking groups
were placed on review for downgrade: BOK Financial Corporation (Issuer
Rating A2); Cullen/Frost Bankers, Inc. (Issuer Rating
A2); Hancock Holding Company (Issuer Rating Baa1); and Texas
Capital Bancshares, Inc. (Issuer Rating Baa3). In
addition, the Prime-1 short-term deposit rating and
Prime-1(cr) short-term CR Assessment of Hancock Holding
Company's lead bank, Whitney Bank, were placed on review
for downgrade. The ratings, BCAs, adjusted BCAs,
and CR Assessments of the following two banking groups were affirmed,
but their outlooks were changed to negative from stable: Comerica
Incorporated (Issuer Rating A3) and Associated Banc-Corp (Senior
Unsecured Baa1).
In related actions, Moody's affirmed the ratings and mantained
the outlooks of three other banks with comparatively high energy-lending
concentrations: Amarillo National Bank (Issuer Rating Baa1),
BBVA Compass Bancshares, Inc. (Issuer Rating Baa3) and Zions
Bancorporation (Senior Unsecured MTN (P)Ba1).
A complete list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
Moody's said the negative rating actions were driven by three broad
factors. First, these banks hold comparatively large energy-related
loan exposures when compared to their tangible common equity. Second,
the prolonged period of low oil prices and Moody's expectation that
prices will remain low for an extended period undermine the quality of
the banks' energy-related loans. Third, to various
degrees, these banks operate in regional economies where the energy
sector contributes more to the local economy than the national average,
exposing the banks to deterioration in their non-energy loan portfolios.
Regarding the four banks whose ratings were placed on review for downgrade
(BOK Financial Corporation, Cullen/Frost Bankers, Inc.,
Hancock Holding Company, and Texas Capital Bancshares, Inc.),
their energy concentrations are comparatively large, making them
more prone to asset quality deterioration if oil prices remain depressed.
The median ratio of outstanding energy loans to tangible common equity
for these banks is 90%, which is significantly higher than
the 10%-15% median for all rated US regional banks.
Furthermore, for these banks, the energy sector is a more
important contributor to their local markets than to the national average.
This higher contribution makes their non-energy loans more prone
to a recession due to prolonged low oil prices.
During its review, Moody's will focus on the risk of the current
stressful environment to the banks' financial performance.
Moody's revised moderate and severe stress assumptions on US banks'
energy exposures and energy-dependent economies will also be a
consideration. The revised assumptions, which include a prolonged
period of low oil prices, result in both a higher probability of
default and loss given default for the banks' energy borrowers.
In addition, Moody's will focus on the mitigating strengths
the banks possess and whether they are sufficient to protect the banks'
credit profiles against this further stress. Moody's notes
the main mitigating elements supporting the banks' creditworthiness
are their capital levels and their strong liquidity profiles, which
are anchored by their deposit bases. In regards to Texas Capital
Bancshares, Inc., Moody's will also focus on
the bank's strategy for enhancing its comparatively weak capital
position in light of the current environment.
Regarding the two banks whose rating outlooks were changed to negative
from stable (Comerica Incorporated and Associated Banc-Corp),
Moody's said low oil prices could weigh on the banks' ratings
if there is evidence of significant additional stress in their energy
portfolios or credit deterioration in the banks' non-energy
exposures. The rating affirmations were based on Moody's
view that their current credit standing is resilient to the weak energy
sector. Their resilience is due to lower direct and indirect energy
exposure compared to the four banks whose ratings were placed on review
for downgrade. For these two banks, their median ratio of
outstanding energy loans to tangible common equity is a lower 47%.
They also operate in local markets in which the energy sector contributes
less to the economy. The banks' solid capital and strong
liquidity profiles help protect their creditworthiness, added Moody's.
Regarding the three banks whose ratings were affirmed and outlooks maintained
(Amarillo National Bank, BBVA Compass Bancshares, Inc.,
and Zions Bancorporation), Moody's said their current ratings
and outlooks incorporate the likelihood of additional stress in the energy
sector.
What Could Change the Ratings
For Amarillo National Bank, downward movement in the BCA could emerge
if Moody's believes the bank's underwriting standards are
weakening, possibly evidenced by above-average loan growth.
To return the outlook back to stable, the bank would need to demonstrate
good resilience against deterioration in its energy portfolio as has been
the case in the past. For upward rating pressure to emerge,
the bank would need to improve its geographical diversification without
increasing its risk profile.
For Associated Banc-Corp, downward movement in the BCA could
emerge if there is further deterioration in the bank's asset quality
or a further decline in its core profitability. To return the outlook
back to stable, the bank would need to demonstrate good resilience
against deterioration in its energy portfolio. For upward rating
pressure to emerge, the bank would need to show a sustainable improvement
in its core profitability without increasing its risk profile.
For BBVA Compass Bancshares, Inc., a weakening in core
profitability and asset quality relative to same-rated peers could
lead to downward movement in the BCA. Negative pressure could also
develop if Moody's believes the bank is embarking on an asset growth
strategy that adds risk to the balance sheet in an attempt to improve
earnings, such as outsized commercial and industrial loan growth.
Upward rating pressure could result from sustained improvement in the
bank's profitability while maintaining good asset quality and capital
ratios.
For BOK Financial Corporation, downward pressure in the BCA could
emerge if the bank's capital and/or profitability declined from
expected levels. Given the review for downgrade, there is
limited upward rating pressure at this time. Nonetheless,
a sustained increase in oil prices would be credit positive.
For Comerica Incorporated, aggressive capital management,
a sizeable acquisition, or notable deterioration in asset quality
could lead to downward movement in the bank's BCA. To return the
outlook back to stable, the bank would need to demonstrate good
resilience against deterioration in its energy portfolio. For rating
upward pressure to emerge, the bank would need to show a sustained
improvement in its profitability.
For Cullen/Frost Bankers, Inc., downward movement in
the BCA could emerge in the event of a more aggressive credit posture
in either its loan or securities portfolio, a comparatively large
acquisition or reduced profitability from the persistent low interest
rate environment. Given the review for downgrade, there is
limited upward rating pressure at this time. Nonetheless,
a sustained increase in oil prices would be credit positive.
For Hancock Holding Company, downward movement in the BCA could
emerge if profitability and/or capital declined from expected levels.
Given the review for downgrade, there is limited upward rating pressure
at this time. Nonetheless, a sustained increase in oil prices
would be credit positive.
For Texas Capital Bancshares, Inc., downward movement
in the BCA could emerge if there was evidence of a relaxation in controls
over the bank's commercial real estate and/or mortgage warehouse lending
business. Given the review for downgrade, there is limited
upward rating pressure at this time. Nonetheless, a sustained
increase in oil prices would be credit positive.
For Zions Bancorporation, upward movement in the BCA could occur
if the company can improve profitability as a result of better cost management.
Zions' successful execution of restructuring initiatives would support
these efforts. As its loan book grows, Zions will need to
show that its enhanced risk management can control its commercial real
estate and energy exposure and maintain its good asset quality,
while reducing potential earnings volatility. Downward movement
in the BCA could emerge if there is a rebuilding of asset concentrations,
a decline in capital or a reversal of improvements in asset quality.
Principal Methodology
The principal methodology used in these ratings was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
List of Affected Ratings
Issuer: Amarillo National Bank
..Affirmations:
....Baseline Credit Assessment, Affirmed
a3
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Long-Term Counterparty Risk Assessment,
Affirmed A2(cr)
....Short-Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long-Term Bank Deposit Rating,
Affirmed A1
....Short-Term Bank Deposit Rating,
Affirmed P-1
....Issuer Rating, Affirmed Baa1
....Outlook, Remains Negative
Issuer: Associated Banc-Corp
..Affirmations:
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa1
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
....Non-cumulative Preferred Stock,
Affirmed Baa3 (hyb)
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Shelf, Affirmed
(P)Baa1
....Subordinate Shelf, Affirmed (P)Baa1
....Non-Cumulative Preferred Shelf,
Affirmed (P)Baa3
....Subordinate Medium-Term Note Program,
Affirmed (P)Baa1
....Outlook, Changed To Negative From
Stable
Issuer: Associated Bank, N.A.
..Affirmations:
....Baseline Credit Assessment, Affirmed
a3
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Long-Term Counterparty Risk Assessment,
Affirmed A2(cr)
....Short-Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long-Term Bank Deposit Rating,
Affirmed A1
....Short-Term Bank Deposit Rating,
Affirmed P-1
....Outlook, Changed To Negative From
Stable
Issuer: BBVA Compass Bancshares, Inc.
..Affirmations:
....Issuer Rating, Affirmed Baa3
....Senior Unsecured Shelf, Affirmed
(P)Baa3
....Subordinate Shelf, Affirmed (P)Baa3
....Preferred Shelf, Affirmed (P)Ba1
....Non-Cumulative Preferred Shelf,
Affirmed (P)Ba2
....Non-cumulative Preferred Stock,
Affirmed Ba2 (hyb)
....Outlook, Remains Stable
Issuer: Compass Bank
..Affirmations:
....Baseline Credit Assessment, Affirmed
baa2
....Adjusted Baseline Credit Assessment,
Affirmed baa2
....Long-Term Counterparty Risk Assessment,
Affirmed Baa1(cr)
....Short-Term Counterparty Risk Assessment,
Affirmed P-2(cr)
....Long-Term Bank Deposit Rating,
Affirmed A3
....Short-Term Bank Deposit Rating,
Affirmed P-2
....Issuer Rating, Affirmed Baa3
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa3
....Subordinate Regular Bond/Debenture,
Affirmed Baa3
....Senior Unsecured Bank Note Program,
Affirmed (P)Baa3
....Subordinate Bank Note Program, Affirmed
(P)Baa3
....Short-Term Bank Note Program,
Affirmed (P)P-3
....Outlook, Remains Stable
Issuer: BOK Financial Corporation
..On Review for Downgrade:
....Issuer Rating, Placed on Review
for Downgrade, currently A2
....Outlook, Changed To Rating Under
Review From Negative
Issuer: BOKF, NA
..On Review for Downgrade:
....Baseline Credit Assessment, Placed
on Review for Downgrade, currently a1
....Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently a1
....Long-Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently Aa3(cr)
....Long-Term Bank Deposit Rating,
Placed on Review for Downgrade, currently Aa2
....Issuer Rating, Placed on Review
for Downgrade, currently A2
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2
..Affirmations:
....Short-Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Short-Term Bank Deposit Rating,
Affirmed P-1
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Comerica Incorporated
..Affirmations:
....Issuer Rating, Affirmed A3
....Senior Unsecured Regular Bond/Debenture,
Affirmed A3
....Subordinate Regular Bond/Debenture,
Affirmed A3
....Outlook, Changed To Negative From
Stable
Issuer: Comerica Bank
..Affirmations:
....Baseline Credit Assessment, Affirmed
a2
....Adjusted Baseline Credit Assessment,
Affirmed a2
....Long-Term Counterparty Risk Assessment,
Affirmed A1(cr)
....Short-Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long-Term Bank Deposit Rating,
Affirmed Aa3
....Short-Term Bank Deposit Rating,
Affirmed P-1
....Issuer Rating, Affirmed A3
....Senior Unsecured Regular Bond/Debenture,
Affirmed A3
....Subordinate Regular Bond/Debenture,
Affirmed A3
....Senior Unsecured Bank Note Program,
Affirmed (P)A3
....Subordinate Bank Note Program, Affirmed
(P)A3
....Short-Term Bank Note Program,
Affirmed (P)P-2
....Outlook, Changed To Negative From
Stable
Issuer: Cullen/Frost Bankers, Inc.
..On Review for Downgrade:
....Issuer Rating, Placed on Review
for Downgrade, currently A2
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2
....Non-cumulative Preferred Stock,
Placed on Review for Downgrade, currently Baa1 (hyb)
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Frost Bank
..On Review for Downgrade:
....Baseline Credit Assessment, Placed
on Review for Downgrade, currently a1
....Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently a1
....Long-Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently Aa3(cr)
....Long-Term Bank Deposit Rating,
Placed on Review for Downgrade, currently Aa2
....Issuer Rating, Placed on Review
for Downgrade, currently A2
..Affirmations:
....Counterparty Risk Assessment, Affirmed
P-1(cr)
....Short-Term Deposit Rating,
Affirmed P-1
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Cullen/Frost Capital Trust II
..On Review for Downgrade:
....Backed Preferred Stock, Placed on
Review for Downgrade, currently A3 (hyb)
Issuer: Hancock Holding Company
..On Review for Downgrade:
....Issuer Rating, Placed on Review
for Downgrade, currently Baa1
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa1
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)Baa1
....Subordinate Shelf, Placed on Review
for Downgrade, currently (P)Baa1
....Preferred Shelf, Placed on Review
for Downgrade, currently (P)Baa2
....Non-cumulative Preferred Shelf,
Placed on Review for Downgrade, currently (P)Baa3
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Whitney Bank
..On Review for Downgrade:
....Baseline Credit Assessment, Placed
on Review for Downgrade, currently a3
....Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently a3
....Long-Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently A2(cr)
....Short-Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently P-1(cr)
....Long-Term Bank Deposit Rating,
Placed on Review for Downgrade, currently A1
....Short-Term Bank Deposit Rating,
Placed on Review for Downgrade, currently P-1
....Issuer Rating, Placed on Review
for Downgrade, currently Baa1
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Whitney National Bank
..On Review for Downgrade:
....Backed Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa1
Issuer: Texas Capital Bancshares, Inc.
..On Review for Downgrade:
....Issuer Rating, Placed on Review
for Downgrade, currently Baa3
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3
....Non-cumulative Preferred Stock,
Placed on Review for Downgrade, currently Ba2 (hyb)
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Texas Capital Bank, National Association
..On Review for Downgrade:
....Baseline Credit Assessment, Placed
on Review for Downgrade, currently baa2
....Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently baa2
....Long-Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently Baa1(cr)
....Long-Term Bank Deposit Rating,
Placed on Review for Downgrade, currently A3
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3
..Affirmations:
....Short-Term Counterparty Risk Assessment,
Affirmed P-2(cr)
....Short-Term Bank Deposit Rating,
Affirmed P-2
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Zions Bancorporation
....Non-cumulative Preferred Stock,
Affirmed Ba3 (hyb)
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Ba1
....Short-Term Medium-Term Note
Program, Affirmed (P)NP
Issuer: ZB, N.A.
..Affirmations:
....Baseline Credit Assessment, Affirmed
baa3
....Adjusted Baseline Credit Assessment,
Affirmed baa3
....Long-Term Counterparty Risk Assessment,
Affirmed Baa2(cr)
....Short-Term Counterparty Risk Assessment,
Affirmed P-2(cr)
....Long-Term Bank Deposit Rating,
Affirmed Baa1
....Short-Term Bank Deposit Rating,
Affirmed P-2
....Issuer Rating, Affirmed Ba1
....Outlook, Remains Positive
Issuer: Amegy Corporation
..Affirmations:
....Issuer Rating, Affirmed Ba1
....Outlook, Remains Positive
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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 Snyder
Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes negative rating actions on six US regional banks with energy concentrations
