TEXT-Fitch affirms Webster Financial Corp's ratings

Mon Nov 26, 2012 10:13am EST

Nov 26 - Fitch Ratings has affirmed the ratings of Webster Financial
Corporation and its subsidiaries including the companies' 'BBB'
long-term Issuer Default Ratings (IDRs). The Rating Outlook is Stable. A
complete list of rating actions follows at the end of this release.

RATING ACTION RATIONALE

The affirmation is supported by Webster's improving profitability and asset
quality trends in line with Fitch's expectations. The Stable Outlook reflects
Fitch's view that Webster's asset quality measures will continue to improve in
the near term, credit losses will remain manageable and tangible capital ratios
will remain at or above current levels.

Webster's tangible common capital ratio is near the lower end of its rated
peers. At current levels, Fitch views Webster's capitalization as a constraint
for further positive ratings action. Given Webster's growth in its commercial
loan portfolio and CMBS portfolio, Fitch expects to see stronger tangible
capital metrics to compensate for the incremental risk to maintain a flat risk
profile.

With a return on average assets (ROA) of 0.87% at the end of third quarter 2012,
earnings performance is in line with similarly rated peers. Typically Webster's
ROA varied from 0.75% to 1.0% prior to the credit crisis and is therefore
solidly within its historical range. Fitch expects earnings headwinds in the
near term despite three years of improving performance. The prolonged low
interest rate environment continues to place negative pressure on NIM at Webster
and throughout the industry. However, Fitch expects earnings to remain within
Webster's historical range in the near term.

The level of problem assets continues to decline but still remains higher than
pre-credit crisis levels. However, overall nonperforming asset (NPA) levels,
inclusive of accruing troubled debt restructurings (TDRs), remain elevated.
Fitch views Webster's elevated level of TDRs as a potential concern, as modified
loans have a tendency to default at a higher rate than performing loans.
Nonetheless, Webster's TDR portfolio has exhibited better performance than many
of its peers.

RATING DRIVERS AND SENSITIVITIES
Fitch believes that Webster's IDRs have limited upside in the near term given
lower capital levels compared to peers, elevated problem assets and earnings
headwinds to confront in the coming quarters. Conversely, reductions in tangible
capital ratios of more than 25bps would negatively impact the current ratings.
Additionally, stagnant or deteriorating asset quality metrics such as NPAs or
charge off rates could result in negative ratings pressure.

Webster Financial Corporation
--Long-term IDR at 'BBB', Stable Outlook;
--Senior Unsecured at 'BBB';
--Viability Rating at 'bbb';
--Short-term IDR at 'F2';
--Support at '5';
--Support Floor at 'NF'.

Webster Bank, NA
--Long-term IDR at 'BBB', Stable Outlook;
--Long-term deposits at 'BBB+';
--Viability Rating at 'bbb';
--Subordinated Debt at 'BBB-';
--Short-term IDR at 'F2';
--Short-term Deposits at 'F2';
--Support at '5';
--Support Floor at 'NF'.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Risk Radar' (Oct. 15, 2012);
--'Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)'
(Aug. 7, 2012);
--'Rating Bank Regulatory Capital and Similar Securities' (Dec. 15, 2011).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
Risk Radar October 2012
Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal (Pro-Cyclical
Capital Policy to Create Greater Capital Volatility for Banks)
Rating Bank Regulatory Capital and Similar Securities
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