Waterbury regional lender Webster Financial’s balance sheet is looking better to Wall Street these days, with Morningstar Research Inc. raising Webster’s credit rating one notch.
Morningstar says it now rates Webster’s credit BBB from BBB-minus, largely due to the lender’s increase in capital and a drop in its roster of bad loans that staked the bank to an improved showing on Morningstar’s recent stress test.
The bank’s ratio of tangible common equity to tangible assets stands at about 7.5%, better than the 4 percent level 2 ½ years ago but still below its peers, Morningstar said.
Webster declined comment.
In its latest report, Morningstar said “thanks to an unimpressive net interest margin and relatively weak expense control, the bank has never shown stellar earnings power. Return on assets averaged only about 1 percent between 2000 and 2007.
The research firm said Webster has managed to curb its level of loans more than 90 days past due to 2.1 percent of all credits on its books, with more than adequate reserves to cover any loans that fall hopelessly into default.
Webster Bank has approximately $18 billion in assets and operates more than 180 branches in Connecticut, Massachusetts, Rhode Island, and New York.
During the credit boom, Webster expanded into brokered construction and home equity loans and risky securities in an attempt to boost net interest margin. This expansion proved
In its stress test, Morningstar said it assigned an average underwriting quality rating to Webster Financial’s loan and securities portfolios.
Webster received a score of fair on the Stress Test as its mediocre earnings power is unable to overcome the loss of capital, the firm said. Webster achieved a good Solvency Score thanks to its strong reserves which overcome the below average capital base.
