S&P Global Downgrades Outlook for Five Regional U.S. Banks to ‘Negative’

The health of regional U.S. banks has recently been called into question, with ratings agency S&P Global downgrading five banks due to their exposure to commercial real estate (CRE). This move has reignited concerns among investors about the sector’s stability.

According to S&P Global, First Commonwealth Financial, M&T Bank, Synovus Financial, Trustmark, and Valley National Bancorp have all been downgraded from “stable” to “negative” outlooks. These downgrades are based on the high levels of CRE loans held by these banks, which could potentially impact their asset quality and performance.

The news comes as New York Community Bancorp recently reported a surprise quarterly loss due to provisions on soured CRE loans, causing a sell-off in U.S. regional banking shares. This has raised concerns among investors and analysts about potential loan defaults as borrowers struggle with higher borrowing costs and low occupancy rates in the wake of the COVID-19 pandemic.

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The sector is also grappling with challenges such as rising deposit retention costs amid high interest rates. S&P Global currently has negative outlooks on nine U.S. banks, with most of these relating to significant CRE exposures.

The downgrades serve as a reminder of the risks facing regional banks, especially in the current economic climate. For more updates on the financial sector, stay tuned to our blog.

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