SNV - PacWest debt rating downgraded to junk at Fitch
2023-05-18 15:02:41 ET
Fitch Ratings downgraded its long-term issuer default rating for PacWest Bancorp ( NASDAQ: PACW ), which has seen its stock sink after the March bank failures, to junk status (BB+) from investment grade (BBB-), according to a Thursday release.
The move was part of Fitch's review of the debt on 14 small- and mid-sized regional lenders. Western Alliance Bancorp ( NYSE: WAL ) got cut to BBB- from BBB+, and Trustmark Corp. ( NASDAQ: TRMK ) was lowered to BBB from BBB+. A debt downgrade generally means that a company's cost of paying interest on its debt could increase.
Nonetheless, regional bank stocks that dropped the most after the recent banking stresses continued to rally in mid-afternoon trading, with the SPDR S&P Regional Banking ETF ( KRE ) edging up 0.4% , as some positive developments earlier this week helped reassure investors.
In its review, Fitch said the downgrades were mostly "limited to a subset of banks that experienced either deposit outflows notably in excess of peers or low tangible capital levels." On Tuesday, though, Western Alliance ( WAL ) said its quarter-to-date deposit growth topped $2B as of May 12, spurring a rally across other beaten-down regional bank stocks.
The banks' LT IDRs that Fitch affirmed with a stable outlook include: BOK Financial Corp. ( BOKF ) ( A ), Cathay General Bancorp ( CATY ) (BB+), First National of Nebraska, Inc. ( OTCPK:FINN ) (BBB), Hilltop Holdings, Inc. ( HTH ) (BBB+), Synovus Financial Corp. ( SNV ) (BBB), Columbia Banking System, Inc. ( COLB ) (BBB+) and Wintrust Financial Corp. ( WTFC ) (BBB+).
The LT IDRs of BankUnited, Inc. ( BKU ) (BBB), Community Bank System, Inc. ( CBU ) (A-) and UMB Financial Corp. ( UMBF ) ( A ) were also affirmed, but with a negative outlook revised from stable.
All in, Fitch contended that the tightening liquidity backdrop will likely continue to weigh on the mid-tier banks in terms of increased funding costs and moderated loan growth.
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PacWest debt rating downgraded to junk at Fitch