Credit ratings agency Standard & Poor’s today cut ratings and revised outlooks on 22 banks, including Waterbury-based Webster Financial, amid concern about further weakening in the financial sector.
S&P said the changes reflected its assessment that volatility will remain in the financial sector and the industry is expected to face tighter regulatory oversight. S&P also said loan losses, which have plagued the industry for more than a year, are likely to continue to increase and could grow beyond expectations.
Webster Financial Corp., the holding company for Webster Bank was among the banks that saw their ratings cut by S&P, although they still remain at investment-grade levels.
BB&T Corp., Capital One Financial Corp., PNC Financial Services Group Inc., Regions Financial Corp. and Wells Fargo & Co. were among other large banks that saw their ratings cut.
Widescale changes to the industry because of the credit crisis and ongoing recession will dramatically alter the banking landscape, S&P credit analyst Rodrigo Quintanilla said in a release.
“We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions,” Quintanilla said. “Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality. Such a transition period justifies lower ratings as industry players implement changes.”
S&P did note that recent capital raising efforts in the sector will help defray some of the losses banks are facing.
Lower credit ratings make it more expensive for companies to borrow money and can sometimes lead to difficulty accessing credit. Low ratings can also affect investments in a company’s debt as some institutional investors are required to only hold debt rated at a certain level. (AP)
