PNC Financial Services Inc., Citizens Financial Group Inc. and Cullen/Frost Bankers led a retreat in bank stocks on Tuesday after Moody’s published 27 ratings actions on U.S. banks.
Moody’s cited the impact of a potential U.S. recession in 2024 and higher interest rates on the quality of corporate debt. All downgrades were by one notch. A one-notch downgrade on debt could mean an extra 0.1% in the cost of borrowing for the largest banks and up to 1% more for smaller banks depending on balance-sheet holdings of each bank, according to industry estimates.
“Today’s move seems to be more of an emotional overreaction, but it’s no surprise given the pressure on net interest income by banks,” Mulberry said. “Historically speaking a 5% interest rate is not a hard stop for business to get done,” Mulberry said. “It’s an adjustment.” Zacks analyst Mulberry said U.S. Bancorp’s balance sheet still reflects its $8 billion acquisition of Union Bank, which closed late last year. The cost of the merger has been a headwind on profits for the moment, he said.
Bank of New York Mellon Corp. BK , Northern Trust Corp. NTRS , State Street Corp. STT , Cullen/Frost Bankers Inc., Truist Financial Corp. TFC and U.S. Bancorp were all placed under review.
Source: News Formal (newsformal.com)
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