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Moody’s, the well-known credit rating organization, downgraded the ratings of 10 U.S. small and mid-sized banks by one notch late Monday, sending shockwaves across a sector still reeling from the collapse of regional banks in March.
The banks affected by the downgrades includes M&T Bank Corp. (NYSE:MTB), Webster Financial Corp. (NYSE:WBS), BOK Financial Corp. (NASDAQ:BOKF), Old National Bancorp (NASDAQ:ONB), Pinnacle Financial Partners Inc. (NASDAQ:PNFP), and Fulton Financial Corp. (NASDAQ:FULT).
Moody’s action comes amid worries about rising financing costs, possible weaknesses in regulatory capital, and escalating risks linked with commercial real estate lending. These concerns are heightened by the declining demand for office space.
“Although the general drain on deposit funding caused by quantitative tightening (QT) moderated in Q2, there remains a significant risk that systemwide deposits will resume their decline in the coming quarters,” Moody’s stated in the report.
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In addition to the downgrades, the rating agency has also announced the following actions:
Premarket trading on Tuesday saw drops in shares of U.S. banks in reaction to this news.
Meanwhile, the Italian government announced an unexpected 40% tax on additional profits for banks, as well as weaker-than-expected trade figures for China, adding to the general risk-averse feeling among investors.
Major banks which include JP Morgan Chase & Co. (NYSE:JPM), Bank of America Corp. (NYSE:BAC), Morgan Stanley (NYSE:MS), Wells Fargo & Co. (NYSE:WFC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), all sit in the red ahead of the market open on Tuesday.
Among the components of the KBW Bank Index, tracked by the Invesco KBW Bank ETF (NYSE:KBWB), Comerica Inc. (NYSE:CMA), Western Alliance Bancorporation (NYSE:WAL) and Zions Bancorporation (NYSE:ZION) were the worst performers in the premarket trading, shedding 4.2%, 3.9% and 3.5% respectively.
Read more: Borrowing Bonanza: US Households Embrace Credit Even As Interest Rates Reach 20-Year Peaks
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