Moody's lowers ratings for 10 US banks, puts 6 under review

By Ovunc Kutlu

ISTANBUL (AA) - Moody's lowered the ratings of 10 American banks and placed six others under review due to funding risks and weak profitability.

M&T Bank Corporation, Webster Financial Corporation and Associated Banc-Corp are some of the small- and mid-sized banks that saw downgrades, while the Bank of New York Mellon Corporation and U.S. Bancorp are among those that have their ratings under review.

Moody's, in addition, changed the outlook for 11 banks to negative from stable, including Capital One Financial Corporation and PNC Financial Services Group, Inc.

"Many banks’ Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital," the agency said in a statement late Monday. "US banks’ Q2 results broadly show a rapid rise in the cost of funding."

"Most banks' deposits were flat or down only modestly, but the mix worsened, with non-interest-bearing deposits declining and banks paying more for deposits. The resulting drop in net interest income and net interest margins eroded profitability and, thus, the ability to replenish capital internally," it added.

Moody's warned that most regional banks have low capital compared to larger American banks, adding asset risks are rising for small and mid-size banks with large exposures.

Three US banks saw a sudden collapse earlier in 2023 -- Silicon Valley Bank and Signature Bank in March, followed by First Republic Bank in May.

Fitch, another rating agency, downgraded the US' long-term foreign-currency credit rating last week to "AA+" from "AAA" with a stable outlook.