ALBAWABA – Citing “tough” operating conditions in the United States (US) banking system, global credit rating company S&P downgraded multiple US banks on Monday, following a similar move by Moody’s earlier this month.
S&P downgraded the ratings of Associated Banc-Corp and Valley National Bancorp on funding risks and a higher reliance on brokered deposits, according to Reuters.
It also downgraded UMB Financial Corp, Comerica Bank and Keycorp, citing large deposit outflows and prevailing higher interest rates.
The sharp rise in US interest rates is weighing on many US banks' funding and liquidity, S&P said in a summarized note, carried by Reuters.
Deposits held by Federal Deposit Insurance Corp (FDIC)-insured banks will continue to decline as long as the Federal Reserve is "quantitatively tightening" to curb inflation.
S&P also downgraded the outlook of S&T Bank and River City Bank to negative from stable on high commercial real estate exposure, among other factors.
Multiple analysts have warned about the possible risks of exposure to crunches in the real estate market.
Moody's, earlier this month, cut the ratings of 10 banks by one notch and placed six banking giants, including Bank of New York Mellon, US Bancorp, State Street and Truist Financial, on review for potential downgrades.
The collapse of Silicon Valley Bank and Signature Bank earlier this year sparked a crisis of confidence in the US banking sector, leading to a run on deposits at a host of regional banks.
