S&P cuts ratings for multiple US banks

investmentnews.com:

Two weeks after Moody’s Investors Service rattled financial stocks by cutting the ratings for a slew of US banks, S&P Global Ratings is downgrading and dimming its outlook for several more — citing a similar mix of pressures making life “tough” for lenders.

S&P lowered grades one notch for KeyCorp, Comerica Inc., Valley National Bancorp, UMB Financial Corp. and Associated Banc-Corp, it said Monday in a statement, noting the impact of higher interest rates and deposit moves across the industry.

S&P also lowered its outlook for River City Bank and S&T Bank to negative and said its view of Zions Bancorp remains negative after the review.

Many depositors have “shifted their funds into higher-interest-bearing accounts, increasing banks’ funding costs,” S&P wrote in a note summarizing the moves. “The decline in deposits has squeezed liquidity for many banks while the value of their securities — which make up a large part of their liquidity — has fallen.”

Moody’s lowered credit ratings for 10 US banks earlier this month and warned it may downgrade others as part of a sweeping look at mounting pressures on the industry.

The KBW Bank Index of major US banks has since slumped almost 7% — heading for its worst monthly performance since the collapse of three regional banks in March sparked a broad selloff.

A spree of Federal Reserve interest-rate hikes is squeezing many small and midsize banks that for years paid little to attract customer deposits that fund loans and other assets on their balance sheets. Consumers and businesses now have more opportunities to earn higher returns elsewhere. That’s prompted non-interest-bearing deposits to fall 23% in the past five quarters, according to S&P.

As cash walks out the door, banks can