Troubled waters for regional banks

Standard & Poor's downgrades two regional banks, and warns of potential for more of the same at eight others.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Kenneth Musante, CNNMoney.com staff writer

Sick of the 'R' word
With oil and gas prices falling:
  • I'll begin to drive more again
  • I'll continue to conserve gas
  • I won't change my driving habits

NEW YORK (CNNMoney.com) -- Mortgage-related problems continued to hammer regional banks, according to a report released Wednesday.

Credit rating agency Standard & Poor's downgraded two regional banks and said it could downgrade eight more in the near future after a review of their respective portfolios. In all, 37% of regional banks could see further downgrades, S&P said.

S&P lowered its credit rating on National City Corp. (NCC, Fortune 500) to A- from A and the rating of First Horizon National Corp. (FHN) to BBB from BBB+.

Lower ratings make it more expensive for banks to borrow money since loans to these institutions are considered to carry a higher risk.

National City's holdings include a large concentration of mortgage and housing-related investments that could continue to deteriorate over the next few quarters, according to S&P.

The Tennessee-based First Horizon was downgraded on problems related to a decline in the credit market, particularly at its retail banking arm. But the bank's move to scale back its operations could help it regain its footing, S&P said.

Meanwhile S&P said that Fifth Third Bancorp (FITB, Fortune 500) could face a credit rating downgrade because of its heavy investments in the sour Florida real estate market.

The decline in Florida home values also presents a large risk to the rating of Regions Financial Corp. (RF, Fortune 500) Last week it acquired $974 million in deposits from Integrity Bank, which failed and was taken over by the Federal Deposit Insurance Corporation.

S&P affirmed its current rating of A+ for Regions, but cautioned that the bank doesn't have much of a cushion against further losses.

Integrity Bank was the 10th regional bank to fail this year, and there has been growing concern for the health of the regional banking system, as well as the funding available to the FDIC to insure customers' savings.

The rating agency also warned of potential downgrades at Citizens Republic Bancorp Inc. (CRBC), Comerica Inc. (CMA), Synovus Financial Corp. (SNV), Wilmington Trust Corp. (WL), Zions Bancorp. (ZION), and Colonial BancGroup Inc. (CNBTo top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 10 food trends could dominate 2015 So long, kale. Here's what's expected to shake up the food industry next year. More
Beyond Russia: Geopolitical hot spots in 2015 Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.