Moody’s Investor Service has initiated a review for possible downgrade on a selection of major U.S. banks, while simultaneously lowering the credit ratings of several mid-sized and smaller lenders. These actions were prompted by potential issues reminiscent of the events that led to the collapse of Silicon Valley Bank and Signature Bank in March earlier this year. The concerns include the impact of higher interest rates, declining asset prices, and a weakening commercial real estate market.
Moody’s highlighted the growing profitability pressures faced by many banks during the second quarter, which are expected to reduce their ability to generate internal capital. The ratings agency also expressed apprehension towards an impending mild recession, combined with a predicted decline in asset quality.
This news comes on the heels of rival ratings agency Fitch’s recent downgrading of U.S. government debt.
The review for possible downgrade has been initiated for the bonds of six large U.S. banks: U.S. Bancorp (ticker: USB), State Street (STT), Bank of New York Mellon (BK), Northern Trust (NTRS), Cullen/Frost Bankers (CFR), and Truist Financial (TFC).
As a result of these developments, shares of U.S. Bancorp, State Street, and Truist Financial were trading lower during premarket trading on Tuesday.
Furthermore, Moody’s also downgraded the credit ratings of two smaller banks, namely Commerce Bancshares (CBSH) and BOK Financial (BOKF).
