Moody's Investors Service lowered credit ratings for 10 small and midsize U.S. banks and said it may downgrade major lenders including U.S. Bancorp, Bank of New York Mellon, State Street and Truist Financial as part of a sweeping look at mounting pressures on the industry.
"Collectively, these three developments have lowered the credit profile of a number of U.S. banks, though not all banks equally," it wrote in some of the assessments.
Firms that had ratings cut included M&T Bank, Webster Financial, BOK Financial, Old National Bancorp, Pinnacle Financial Partners, and Fulton Financial. Northern Trust and Cullen/Frost Bankers are also under review for downgrades.
Moody's also adopted a "negative" outlook for 11 lenders, including PNC Financial Services Group, Capital One Financial, Citizens Financial Group, Fifth Third Bancorp, Regions Financial, Ally Financial, Bank OZK and Huntington Bancshares.
Shares of several affected companies dropped in early New York trading. U.S. Bancorp and Bank of New York Mellon both slid 2.3%, while Truist fell 1.8%. PNC was down 1.8%, and Capital One lost 2%. Among the biggest losers were Citizens Financial, which declined 2.9%, and Ally Financial, which dropped 2.7%.
Investors,
"Rising funding costs and declining income metrics will erode profitability, the first buffer against losses," Moody's wrote in a separate note explaining the moves. "Asset risk is rising, in particular for small and midsize banks with large CRE exposures."
Some banks have curbed loan growth, which preserves capital but also slows the shift in their loan mix toward higher-yielding assets, Moody's said.
Banks that depend on more concentrated or higher levels of uninsured deposits are more exposed to these pressures, especially banks with high levels of fixed-rate securities and loans.
— With assistance from Abhishek Vishnoi
