Moody’s downgrades 11 regional banks, including Zions, U.S. Bank, Western Alliance
More than a month after the failure of the Silicon Valley Bank, Moody’s Investors Service downgraded 11 investors.
Moody’s research released on Friday suggests that the industry is experiencing greater instability from several bank failures and high inflation, calling “into question whether some banks’ assumed high stability of deposits and their operational nature, should be reevaluated,” The Wall Street Journal reported.
Six U.S. banks were placed on Moody’s review list in March, per Reuters.
All six banks put for review failed and were downgraded with the new study, including Comerica Inc., First Republic Bank, Intrust Financial Corporation, UMB Financial Corp, Western Alliance Bancorp and Zions Bancorporation.
The other downgraded banks include Associated Banc-Corp., First Hawaiian Inc., Washington Federal Inc. and U.S. Bank, reported WSJ.
U.S. Bancorp lost $682 billion in assets, Zions Bancorp lost $89 billion, and finally, Bank of Hawaii Corp. lost $24 million.
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Why some of those banks failed Moody’s review
The U.S. Bank was downgraded for having “relatively low capitalization,” according to the report per WSJ. Executives said the capital levels of the bank fell because of a recent acquisition and hope to rebuild it over the next year or so.
By the end of 2022, Western Alliance had over half of its deposits uninsured which caused a substantial outflow of 11% in the first part of 2023. According to WSJ, this forced the bank to rely on higher-cost funding. A spokesperson for the bank said the company didn’t agree with the downgrade, but was “pleased” that Moody’s recognizes the bank’s “stable outlook.”
“Significant” unrealized losses in Zion’s securities portfolio have decreased its capital, reported WSJ. Which the bank’s director of investor relations, James Abbott disagreed with. He said, that Zion’s granular, low-cost deposit base, more than makes up for the loss in the security portfolio.
