Moody's downgraded the credit ratings of several small and medium-sized U.S. banks on Monday, warning of possible further downgrades for some of the largest U.S. banks.
Also, Moody's warned that the credit strength of the US banking sector will likely be tested by funding risks and weak profitability.
In this regard, Moody's downgraded 10 banks by one notch and put six banking giants under review for possible downgrades, led by Bank of New York Mellon, US Bancorp, State Street and Trust Financial.
Moody's said in a note, quoting Reuters, that the second-quarter results of many banks in the United States showed increasing pressure on profitability that would reduce their ability to create internal capital, at a time when the United States recession in early 2024 is mild, explaining That the quality of assets may decline along with the risks related to the commercial real estate portfolios of some banks.
The agency also changed its outlook to negative for 11 major US banks, including Capital One Financial (NYSE:COF), Citizens Financial Group Inc (NYSE:CFG) and Fifth Third Bancorp (NASDAQ:FITB).
Fifth Third Bancorp
However, Moody's warned that banks with large unrealized losses that are not reflected in their regulatory capital ratios are at risk of losing confidence amid the current high interest rate environment.
The comprehensive report by Moody's, the global credit rating agency, comes against the backdrop of tightening monetary conditions by the US Federal Reserve, after the fastest pace of interest rate increases in decades led to a slowdown in demand and borrowing in the United States.
