Following a similar decision by Moody’s, S&P Global reduced credit ratings and downgraded outlooks for a number of U.S. banks on Monday, warning that funding problems and declining profitability will probably put the sector’s credit strength to the test.
Associated Banc-Corp (ASB.N) and Valley National Bancorp (VLY.O) had their ratings reduced by S&P due to funding risks and a greater reliance on brokered deposits.
Along with downgrading these companies, it also downgraded UMB Financial Corp (UMBF.O), Comerica Bank (CMA.N), and KeyCorp (KEY.N), citing significant deposit withdrawals and the current elevated interest rates.
According to S&P, many U.S. banks are having trouble finding and maintaining liquidity due to a substantial rise in interest rates. It also stated that deposits held by banks covered by the Federal Deposit Insurance Corp. (FDIC) will continue to decrease as long as the Federal Reserve is “quantitatively tightening.”
The rating agency also reduced the outlook for S&T Bank and River City Bank from stable to negative due to, among other things, their significant exposure to the commercial real estate (CRE) market.
Earlier this month, Moody’s downgraded the ratings of 10 banks by one level and put six of the biggest banks under scrutiny for possible downgrades, including Bank of New York Mellon BK.N, US Bancorp (USB.N), State Street (STT.N), and Truist Financial (TFC.N).
Despite regulators implementing emergency measures to shore up confidence, the failure of Silicon Valley Bank and Signature Bank earlier this year caused a crisis of confidence in the U.S. banking sector, leading to a run on deposits at a number of regional banks.
