Fitch Affirms Webster Financial Corp's Ratings at 'BBB'/'F2' After Peer Review; Outlook Stable

Wed Feb 5, 2014 4:40pm EST

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(The following statement was released by the rating agency) NEW YORK, February 05 (Fitch) Fitch Ratings has affirmed Webster Financial Corp's (WBS) ratings at 'BBB'/'F2'. The Rating Outlook remains Stable. WBS' ratings reflect its operating performance, franchise strength and liquidity profile in line with its rating category. However, capital levels remain in the bottom quartile relative to the peer group. The Stable Outlook reflects Fitch's view that WBS' risk profile will remain relatively unchanged in the near term. KEY RATING DRIVERS - IDRS, VRs, AND SENIOR DEBT WBS' NPAs rank in the top quartile of the mid-tier group at over 3.5% but are largely driven by Webster's conservative approach to trouble debt restructure (TDR) identification. Over 50% of the bank's nonperforming assets are TDRs. As a result, Fitch expects WBS' NPA levels to continue to rank in the top quartile of the mid-tier bank group since TDRs retain their classification for the life of the loan. WBS' earnings are solid and finished 2013 above the mid-tier median level. Solid earnings are driven by relatively stronger operating leverage than its peers. In addition, WBS's earnings profile is also aided by a relatively higher yielding securities portfolio. The portfolio yield is over 80bps higher than the midtier group median. Over 25% of WBS' securities portfolio is invested in higher yielding, non-government guaranteed securities. Fitch expects WBS's earnings to remain above the peer median as it net interest margin has been relatively more stable than its peers. RATING SENSITIVITIES - IDRS, VRs, AND SENIOR DEBT While Fitch views WBS' capital levels as adequate, continued reductions to capital could result in negative ratings pressure. Conversely, if WBS managed its capital levels at higher levels, positive ratings moment could build. KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES WBS' preferred stock is rated five notches below its VR to reflect loss severity and an assessment of increment non-performance risk. RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES WBS' preferred stock rating is sensitive to changes in WBS' VR. Rating sensitivities for the VR are listed above. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS Webster Bank, NA is a wholly owned subsidiary of WBS. Webster Bank, NA's ratings are aligned with WBS, reflecting Fitch's view that the bank subsidiary is core to the franchise. SUBSIDIARY AND AFFILIATED COMPANY RATING SENSITIVITIES Webster Bank, NA ratings are sensitive to changes to WBS' VR or any changes to Fitch's view of structural subordination between bank subsidiary and holding company. Rating sensitivities for the VR are listed above. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR WBS' Support Rating and Support Rating Floor of '5' and 'NF' reflect Fitch's view that the company is unlikely to procure extraordinary support should such support be needed. KEY RATING SENSITIVITIES- SUPPORT RATING AND SUPPORT RATING FLOOR WBS' Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need. Fitch reviewed WBS' ratings as part of the mid-tier regional bank review. The 19 banks in today's review include: Associated Banc-Corp (ASBC), BOK Financial Corp (BOKF), Cathay General Bancorp (CATY), City National Bancorp (CYN),Cullen/Frost Bankers, Inc (CFR), East West Bancorp, Inc. (EWBC), First Horizon National Corp (FHN), First National of Nebraska, Inc. (FNNI), First Niagara Financial Group, Inc. (FNFG), First Republic Bank (FRC), First Merit (FMER), Fulton Financial Corp (FULT), Hancock Holding Company (HBHC), People's United Financial, Inc. (PBCT), Synovus Financial Corp (SNV), TCF Financial Corp (TCB), UMB Financial Corporation (UMB), Webster Financial Corp (WBS), Wintrust (WTFC). Fitch has affirmed the following ratings with a Stable Outlook: Webster Financial Corporation --Long-term IDR at 'BBB'; Outlook Stable; --Senior unsecured at 'BBB'; --Viability Rating at 'bbb'; --Preferred Stock at 'B+'; --Short-term IDR at 'F2'; --Support at '5'; --Support Floor at 'NF'. Webster Bank, NA --Long-term IDR at 'BBB'; Outlook Stable; --Long-term deposits at 'BBB+'; --Viability Rating at 'bbb'; --Short-term IDR at 'F2'; --Short-term Deposits at 'F2'; --Support at '5'; --Support Floor at 'NF'. Contact: Primary Analyst Jaymin Berg, CPA Director +1-212-908-0368 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Ryan Doyle Director +1-212-908-9162 Committee Chairperson Christopher Wolfe Managing Director +1-212-908-0771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. Applicable Criteria and Related Research: --2014 Outlook: U.S. Banks (Nov. 21, 2013) --U.S. Banks: Liquidity and Deposit Funding (Aug. 8, 2013) --U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) (June 18, 2013) --U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? (July 11, 2013) --Global Trading and Universal Banks - Periodic Review (Dec. 12, 2013) --Fitch Fundamentals Index - U.S.; Index Trend Analysis 4Q13 (Jan. 15, 2014) --Risk Radar Global - Q313 (Sept. 5, 2013) --Fitch Global Corporate Rating Activity – Third Quarter 2013 (Dec. 5, 2013) --U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) (Jan. 27, 2014) --Global Financial Institutions Rating Criteria (Jan. 31, 2014) --Assessing and Rating Bank Subordinated and Hybrid Securities (Jan. 31, 2014) Applicable Criteria and Related Research: 2014 Outlook: U.S. Banks here U.S. Banks: Liquidity and Deposit Funding here U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) here U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? here Global Trading and Universal Banks - Periodic Review here Fitch Fundamentals Index here Risk Radar Global - Q313 here Fitch Global Corporate Rating Activity —Third-Quarter 2013 here U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) here Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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