S&P downgrades several US banks due to “difficult” operating conditions

S&P downgrades several US banks due to "difficult" operating conditions

(Reuters) – Standard & Poor’s Global on Monday downgraded the credit ratings and revised its outlook for several US banks, following a similar move by Moody’s, warning that funding risks and weak profitability will likely test the sector’s credit strength.

S&P downgraded Associated Banc-Corp and Valley National Bancorp on funding risk and greater reliance on intermediary deposits.

It also downgraded UMB Financial Corp, Comerica Bank and Keycorp, due to large deposit outflows and prevailing high interest rates.

The sharp rise in interest rates is weighing on the funding and liquidity of many US banks, S&P said in a summary note, adding that deposits held by FDIC banks will continue to decline as long as the Fed “quantitative tightening.”

The rating agency also lowered S&T Bank and River City Bank’s outlook to negative from stable on Commercial Real Estate Rising (CRE) among other factors.

Moody’s earlier this month downgraded 10 banks by one notch and put six giant banks, including Bank of New York Mellon BKN, US Bancorp, State Street and Trust Financial, under review for a possible downgrade.

The collapse of Silicon Valley and Signature Bank earlier this year triggered a crisis of confidence in the US banking sector, leading to a run for deposits at a handful of regional banks, despite emergency measures to boost confidence by authorities.

(Reporting by Gokul Picharody in Bengaluru; Additional reporting by Akanksha Khushi; Editing by Varun HK)

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