Moody's mulls cutting ratings for six US regional banks

Moody's mulls cutting ratings for six US regional banks
Exposure to commercial real estate loans is the concern.
JUN 07, 2024
By  Bloomberg

Moody’s Ratings said at least six US regional banks with a substantial exposure to commercial real estate loans are at risk of having their debt ratings downgraded.

The long-term ratings of First Merchants Corp., F.N.B. Corp., Fulton Financial Corp., Old National Bancorp, Peapack-Gladstone Financial Corp. and WaFd were placed on review for downgrade by the ratings provider.

Regional banks with a substantial concentration in commercial real estate loans face ongoing asset quality and profitability pressures as higher-for-longer interest rates heighten longstanding risks, especially during cycle downturns, Moody’s said in separate statements.

During the low-interest-rate environment that prevailed prior to the onset of the Federal Reserve’s rate-hike cycle, many regional banks chose to build and maintain meaningful concentrations in commercial real estate, which is a “volatile asset class,” according to Moody’s. At Fulton, for example, the asset class represents 267% of tangible common equity as of March 31, Moody’s said.

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