S&P Global downgraded its ratings on several U.S. banks, citing rising interest rates and large outflows of deposits, issues that have been on investors’ minds since Silicon Valley Bank and Signature Bank collapsed earlier this year.
Late Monday, S&P Global cut its ratings on Comerica , Associated Banc-Corp , KeyCorp , Valley National Bancorp , and UMB Financial . The ratings company said pressure on banks is likely to continue as long as the Federal Reserve continues to aggressively raise interest rates. The central bank’s target for the fed-funds rate has risen by 5.25 percentage point since March 2022, lifting rates available on investments such as money-market funds. That gives savers a reason to move money out of bank deposits, one of the main sources of cash banks use to fund their loans. Higher rates mean banks have to pay more to borrow.
Despite the rating cut, the bank stocks were little affected in premarket trading Tuesday. Comerica declined 0.3%, Associated Banc-Corp dropped 0.6%, KeyCorp fell 0.9%, Valley National gained 0.1%, and UMB Financial was flat. This move from S&P Global isn’t the first downgrade of U.S. banks from a credit-rating company this year. Moody’s Investors Service downgraded ratings of 10 lenders earlier this month due to the chance of a recession, funding costs, lower regulatory capital on hand at regional banks, and the possibility of defaults in commercial real estate.“The lower OE score for U.S.