Moody’s downgrades credit ratings for 10 US banks, more cuts likely; stocks fall 1-3%

Moody’s Investors Service cut credit ratings for 10 small and midsize US banks and placed some major lenders including M&T Bank Corp., Webster Financial Corp., BOK Financial Corp., Old National Bancorp, Pinnacle Financial Partners Inc., and Fulton Financial Corp.

The rating agency also adopted a “negative” outlook for 11 lenders, including PNC Financial Services Group, Capital One Financial Corp., Citizens Financial Group Inc., Fifth Third Bancorp, Regions Financial Corp., Ally Financial Inc., Bank OZK and Huntington Bancshares Inc.

Moody’s warned US banks will find it harder to make money as interest rates remain high, funding costs climb and a recession looms. It also cited some lenders’ exposure to commercial real estate as a concern, Reuters reported.

The banking stocks downgraded by Moody’s declined between 1.7% and 2.1%. The KBW Regional Banking Index lost 1.38% on Tuesday, while the broader S&P 500 Banks Index also declined almost 1.07%.

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Meanwhile in Europe, shares of major Italian banks Intesa Sanpaolo, Banco BPM and UniCredit fell between 5.9% and 9% after the government set a one-off 40% tax on profits reaped from higher interest rates, Reuters reported.

The European bank index slipped 3.54%.

According to the Reuters report, Citigroup analysts calculated the tax could wipe nearly a fifth off Italian banks’ 2023 net income, while Bank of America estimates showed the measure could generate up to 3 billion euros ($3.3 billion) for the government.

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(With inputs from agencies)

Updated: 09 Aug 2023, 08:36 AM IST