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S&P Global, like Moody's, downgraded credit ratings and revised outlooks for many US banks on Monday. The move comes as the industry faces significant funding challenges and decreased profitability.
Due to financing risks and an increased reliance on brokered deposits, S&P downgraded Associated Banc-Corp and Valley National Bancorp.
UMB Financial Corp, Comerica Bank, and Keycorp were also downgraded by the agency, citing large deposit outflows and rising interest rates.
According to S&P, rising interest rates are exerting pressure on US banks' funding and liquidity. Deposits at FDIC-insured banks may continue to fall as long as the Federal Reserve engages in "quantitative tightening."
S&P also downgraded S&T Bank and River City Bank's outlook to negative, owing to their heavy exposure to commercial real estate (CRE).0
Moody's already reduced the ratings of ten banks by one notch and placed significant financial institutions such as Bank of New York Mellon, US Bancorp, State Street, and Truist Financial under scrutiny for prospective downgrades.
Following the failures of Silicon Valley Bank and Signature Bank earlier this year, the banking system suffered a confidence crisis, driving deposit runs on regional banks despite emergency measures to boost confidence.
The outlook for the banking sector in the United States remains uncertain, as funding problems and lower profitability persist. The response of the sector and regulatory initiatives will be critical in navigating these difficult situations.
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