Moody’s moved to downgrade credit ratings for ten U.S. banks this week, citing concerns about funding risks and profitability challenges within the banking sector. In addition, the firm also confirmed that it has placed six of the nation’s largest banks under review for possible downgrades of their own.
Concerns about credit ratings amid banking uncertainty
According to Moody’s second quarter filings from many U.S. banks suggest trouble ahead. In a note explaining the credit ratings downgrade, the company said:
“Many banks’ second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital.”
Moody’s also expressed concerns that a potential 2024 recession could add to those pressures. The agency noted that a decline in asset quality could seriously impact those banks’ commercial real estate portfolios. Factors like higher interest rates and reduced CRE credit were blamed for the increased risk.
Downgrades for banks of all sizes
The ten banks directly affected by the credit ratings downgrade are all small and mid-sized banks. They include Amarillo National Bancorp, Associated Banc-Corp, BOK Financial Corporation, Commerce Bancshares, Fulton Financial Corporation, M&T Bank Corporation, Old National Bancorp, Pinnacle Financial Partners, Prosperity Bancshares, and Webster Financial Corporation.
The six banks placed under review are: Bank of New York Mellon Corporation, Cullen/Frost Bankers, Northern Trust Corporation, State Street Corporation, Truist Financial Corporation, and U.S. Bancorp.
The agency also announced that it has changed its outlook from stable to negative for the following eleven banks:
Ally Financial, Bank OZK, Cadence Bank, Capital One Financial Corporation, Citizens Financial Group, F.N.B. Corporation, Fifth Third Bancorp, Huntington Bancshares, PNC Financial Services Group, Regions Financial Corporation, and Simmons First National Corporation.
The Moody’s credit ratings downgrade comes on the heels of a Fitch downgrade of the nation’s credit rating. Though talk of recession has waned in recent weeks, these and other moves by ratings agencies confirm that worries about the financial sector and overall economy may not be going away any time soon.