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The Zacks Analyst Blog Highlights M&T Bank, Associated Banc-Corp, U.S. Bancorp, Truist Financial and Capital One

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For Immediate Release

Chicago, IL – August 9, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: M&T Bank (MTB - Free Report) , Associated Banc-Corp (ASB - Free Report) , U.S. Bancorp (USB - Free Report) , Truist Financial (TFC - Free Report) and Capital One (COF - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

U.S. Bank Ratings Cut by Moody's on Funding Costs, CRE Lending

In a big blow to the U.S. banking industry, Moody’s cut the ratings of 10 small-to-mid-sized institutions and placed six bigger lenders under review for potential downgrades. The rating agency also downgraded its outlook to negative from stable for 11 other banks.

The 10 banks whose debt ratings were slashed by Moody’s include M&T Bank, Associated Banc-Corp, Webster Financial, Prosperity Bancshares, Inc. and BOK Financial. Further, the ratings outlook of Bank of New York Mellon, U.S. Bancorp, State Street, Northern Trust, Cullen/Frost Bankers, Inc. and Truist Financial have been placed under review for downgrade.

Capital One, Citizens Financial, Fifth Third Bancorp, Bank OZK, PNC Financial and Regions Financial are some big names whose outlook was lowered by Moody’s to negative on Monday.

The rating agency noted that rising funding costs, potential regulatory capital weakness and heightened risks associated with commercial real estate (CRE) loans on subdued office space demand are putting strain on banks’ profitability.

In a note, Moody’s stated, “Many banks' second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital. This comes as a mild U.S. recession is on the horizon for early 2024 and asset quality looks set to decline, with particular risks in some banks’ commercial real estate (CRE) portfolios.”

The collapse of Silicon Valley Bank and Signature Bank in early March sparked a regional banking crisis, leading to deposit flight despite regulators’ emergency actions to shore up confidence. The rating agency warns that the current high interest rate environment has made many banks with substantial unrealized losses not reflected in their regulatory capital ratios vulnerable to a loss of confidence.

The Federal Reserve increased the interest rates at the fastest pace in decades to contain stubborn inflation, which has slowed down credit demand. Also, a recent Federal Reserve survey data noted that the U.S. banks reported tighter credit standards and muted wholesale and retail loan demand during the second quarter.

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