S&P Global Ratings has downgraded five regional banks and put several others on a negative outlook due to the increasingly difficult operating environment for US lenders.
The move came as shares of Republic Bank parent Republic First Bancorp tumbled over 40% after it told investors it will be delisted from the Nasdaq on Wednesday after failing to submit its 2022 Form 10-K annual report with the Securities and Exchange Commission.
Banks downgrade by one notch by S&P include KeyCorp (NYSE:KEY), Comerica (NYSE:CMA) Inc, Valley National Bancorp, UMB Financial Corp and Associated Banc-Corp.
The agency cited higher funding costs and troubles in the commercial real estate sector that will likely test the credit strength of lenders, according to a report on Reuters.
Additionally, the collapse of Silicon Valley Bank and Signature Bank in early March this year sparked a regional banking crisis, leading to a deposit flight despite regulators’ emergency actions to shore up confidence.
S&P’s actions follow a similar move by Moody’s in early August when it cut the credit ratings of a number of small and mid-sized lenders and placed several big Wall Street names on negative review.
Moody’s downgraded the ratings of 10 banks by one rung, while major lenders Bank of New York Mellon, US Bancorp, State Street, Truist Financial, Cullen/Frost Bankers and Northern Trust are now under review for a potential downgrade.
It said the rating action reflected several sources of strain on the US banking sector: funding pressures, regulatory capital weaknesses and rising risks associated with commercial real estate exposures.
The S&P 500 banks index was down 1.7% shortly after midday on Tuesday, while Bank of America Corp (NYSE:BAC), Wells Fargo & Company (NYSE:WFC), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) fell 1.7%, 1.3%, 1.2% and 1% respectively.
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