Moody’s Investors Services is contemplating downgrading the credit ratings of six major U.S. banks, which include U.S. Bancorp, State Street Corp., and Bank of New York Mellon Corp. On Monday, the credit ratings agency downgraded the debt ratings of several small and mid-sized banks as part of its recent series of rating actions on U.S. banks.
The U.S. banking industry experienced a significant blow in March with the collapse of Silicon Valley Bank and others. Moody’s highlights that the industry continues to face challenges concerning interest rate and asset and liability management risks, which have implications for liquidity and capital.
Apart from U.S. Bancorp, State Street, and Bank of New York Mellon, Northern Trust Corp., Cullen/Frost Bankers Inc., and Truist Financial were also put under review for a potential downgrade.
Moody’s states that the second-quarter results of many banks revealed increasing profitability pressures, reducing their ability to generate internal capital. As a mild recession approaches and asset quality appears to decline, this impact will particularly affect some banks’ commercial real estate portfolios.
Moody’s emphasizes that asset risk is on the rise, especially for small and mid-sized banks with significant exposures to commercial real estate (CRE).
Among the smaller banks, Commerce Bancshares Inc. and BOK Financial Corp had their credit ratings downgraded.
Furthermore, Moody’s assigned negative outlooks to 11 lenders, including Ally Financial Inc. and Capital One Financial Corp.
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Moody’s report sheds light on the vulnerabilities faced by major U.S. banks in these uncertain times. The potential downgrade of credit ratings serves as a reminder of the ongoing economic challenges due to the COVID-19 pandemic.