Bank stocks sink on Moody's downgrades, Italy's windfall tax
By Niket Nishant and Chibuike Oguh
(Reuters) — U.S. and European bank stocks dropped on Tuesday on renewed investor worries about the health of the industry after ratings agency Moody's (NYSE:MCO) downgraded several U.S. lenders and Italy approved a surprise 40% windfall tax on its lenders.
Moody's cut credit ratings of several U.S. regional lenders on Monday and placed some banking giants on review for potential downgrade. It warned U.S. banks will find it harder to make money as interest rates rise, funding costs climb and a recession looms. It also cited some lenders' exposure to commercial real estate as a concern.
«What we're doing here is recognizing some headwinds — we're not saying that the banking system is broken,» Ana Arsov, managing director of financial institutions at Moody's, told Reuters in an interview.
The failures of three U.S. lenders earlier this year sparked the biggest industry crisis since 2008 and precipitated UBS Group's government-backed takeover of Credit Suisse. While the turmoil has subsided in recent months, investors remain cautious.
The KBW Regional Banking Index lost 2.6% on Tuesday, while the shares of some of the banks downgraded by Moody's, including M&T Bank (NYSE:MTB), Pinnacle Financial Partners (NASDAQ:PNFP), and BOK Financial Corp, fell between 2.6% and 3.7%.
Banks that were placed on review for potential downgrade, including Bank of New York Mellon (NYSE:BK), US Bancorp (NYSE:USB), State Street (NYSE:STT) and Truist Financial (NYSE:TFC) sank more than 2%. Truist and BNY Mellon declined to comment, while the others did not immediately respond to requests for comment.
The gloom also affected major lenders that were not mentioned by Moody's, with the broader S&P 500 Banks Index
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