The financial health of US lenders would likely be put to the test by rising funding costs and issues in the commercial real estate sector, according to S&P Global, which reduced its credit ratings and outlook on a number of U.S. regional banks in line with Moody's.
The U.S. Federal Reserve's unrelenting rate-hike campaign has increased deposit costs for banks, which are now required to pay out higher interest to prevent depositors from leaving for other high-yielding alternatives.
Due to funding risks and a greater reliance on brokered deposits, S&P reduced the ratings of Associated Banc-Corp and Valley National Bancorp on Monday. UMB Financial Corp., Comerica Bank, and KeyCorp were also downgraded due to significant deposit withdrawals and the current high interest rate environment.\
Shares of KeyCorp dropped by 1%, while losses ranged from 0.3% to 0.8% for Comerica, Valley National, UMB Financial, and Associate Banc-Corp.
S&P also changed the outlook from "stable" to "negative" for S&T Bank and River City Bank due to increased CRE exposure.
The agency's move will increase the cost of borrowing for the struggling banking industry, which is trying to recover from the effects of the crisis that occurred earlier this year when Silicon Valley Bank and Signature Bank went under, sparking a loss of confidence and causing a run on deposits at several local lenders.
Global borrowing costs have also increased, with U.S. Treasury rates reaching their highest level in 16 years on Tuesday as the bond market collapse reached its sixth week.
The downgrades by S&P's peer Moody's, which cut the ratings of 10 U.S. banks and placed six of them, including Bank of New York Mellon, US Bancorp, State Street, and Truist Financial, under review for possible downgrades, occurred weeks after similar downgrades by S&P.
Last week, a Fitch analyst told the media that numerous U.S. banks, including JPMorgan Chase, might receive downgrades if the sector's "operating environment" continued to deteriorate. Fitch is the last of the three major rating agencies.
(Source:www.investing.com)
The U.S. Federal Reserve's unrelenting rate-hike campaign has increased deposit costs for banks, which are now required to pay out higher interest to prevent depositors from leaving for other high-yielding alternatives.
Due to funding risks and a greater reliance on brokered deposits, S&P reduced the ratings of Associated Banc-Corp and Valley National Bancorp on Monday. UMB Financial Corp., Comerica Bank, and KeyCorp were also downgraded due to significant deposit withdrawals and the current high interest rate environment.\
Shares of KeyCorp dropped by 1%, while losses ranged from 0.3% to 0.8% for Comerica, Valley National, UMB Financial, and Associate Banc-Corp.
S&P also changed the outlook from "stable" to "negative" for S&T Bank and River City Bank due to increased CRE exposure.
The agency's move will increase the cost of borrowing for the struggling banking industry, which is trying to recover from the effects of the crisis that occurred earlier this year when Silicon Valley Bank and Signature Bank went under, sparking a loss of confidence and causing a run on deposits at several local lenders.
Global borrowing costs have also increased, with U.S. Treasury rates reaching their highest level in 16 years on Tuesday as the bond market collapse reached its sixth week.
The downgrades by S&P's peer Moody's, which cut the ratings of 10 U.S. banks and placed six of them, including Bank of New York Mellon, US Bancorp, State Street, and Truist Financial, under review for possible downgrades, occurred weeks after similar downgrades by S&P.
Last week, a Fitch analyst told the media that numerous U.S. banks, including JPMorgan Chase, might receive downgrades if the sector's "operating environment" continued to deteriorate. Fitch is the last of the three major rating agencies.
(Source:www.investing.com)