Standard & Poor’s downgrades several US banks due to growing liquidity concerns

Aug 22 (Reuters) – S&P Global followed Moody’s in downgrading its credit ratings and outlooks for several US regional banks, saying rising financing costs and troubles in the commercial real estate sector are likely to test lenders’ credit strength.

The relentless campaign of interest rate hikes by the US Federal Reserve raised deposit costs for banks, which had to pay higher interest to prevent depositors from fleeing to other higher-yielding alternatives.

S&P on Monday downgraded Associated Banc-Corp (ASB.N) and Valley National Bancorp (VLY.O) due to funding risks and increased reliance on brokerage deposits, while downgrading UMB Financial Corp (UMBF.O) and Comerica Bank (VLY.O). CMA). N) and KeyCorp (KEY.N) due to large deposit outflows and prevailing high interest rates.

KeyCorp shares fell 1% while Comerica, Valley National, UMB Financial and Associate Banc-Corp shares fell between 0.3% and 0.8%.

Standard & Poor’s also downgraded the outlook for S&T Bank and River City Bank to “negative” from “stable”, citing higher exposure to CRE.

The agency’s action would make borrowing more expensive for the ailing banking sector looking to weather the effects of the crisis earlier this year, when the collapse of Silicon Valley and Signature Bank led to a loss of confidence and a run on deposits. In many regional lenders.

Borrowing costs have also risen globally, with US Treasury yields hitting a 16-year high as bond market turmoil entered its sixth week on Tuesday.

S&P’s action came weeks after similar downgrades by peer Moody’s, which downgraded 10 US banks and put down six, including Bank of New York Mellon (BK.N), US Bancorp (USB.N) and State Street (STT). .N). and Trust Financial (TFC.N), under review for possible downgrades.

An analyst at Fitch, the last of the big three rating agencies, told CNBC last week that several US banks, including JPMorgan Chase (JPM.N), could see ratings downgrades if the “operating environment” in the sector deteriorates further. .

Our standards: Thomson Reuters Trust Principles.