S&P Global Ratings downgrades five U.S. regional banks after review of risk

S&P Global Ratings downgraded the ratings of five regional banks late Monday by a single notch, after a review that focused on risks relating to funding, liquidity and asset quality with an emphasis on office commercial real estate. The rating agency cut its rating on Associated Banc. Corp. (ASB), Comerica Inc. (CMA), KeyCorp. (KEY), UMB Financial Corp. (UMBF) and Valley National Bancorp. (VLY) and said the outlook on all five is stable. S&P also affirmed ratings on River City Bank and S&T Bank and revised the outlook to negative. The agency affirmed ratings on Zions Bancorp. (ZION) and maintained a negative outlook. And it affirmed ratings and a stable outlook on Synovus Financial Corp. (SNV) and Truist Financial Corp. (TFC). "We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ," S&P said in a statement. "For instance, some that have seen greater deterioration in funding--as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits--may also have below-peerprofitability, high unrealized losses on their assets, or meaningful exposure to CRE." However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks. The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months. S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.

-Ciara Linnane

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08-22-23 0613ET

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