Fitch Takes Rating Actions on 19 U.S. Mid-Tier Regional Banks

Wed Feb 5, 2014 5:41pm EST

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Mid-tier Peer Review Rating Spreadsheet here NEW YORK, February 05 (Fitch) Fitch Ratings has taken rating actions on 19 U.S. mid-tier regional banks. During Fitch's review of the mid-tier regional banks, Fitch upgraded the Issuer Default Ratings (IDRs) of two banks (Associated Banc-Corp. and First Republic Bank). Additionally, Fitch revised the Outlook for People's United Financial, Inc. to Negative from and revised the Outlook for First Niagara Financial Group, Inc. to Stable from Negative. The banks included 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). A full list of rating actions for the entire peer group can be accessed via the link provided above. The mid-tier regional group comprises banks with total assets ranging from $10 billion to $37 billion. IDRs for this group are relatively dispersed with a low of 'BB' and a high of 'A+'. The average IDR for the group is 'BBB'. Mid-tier regional banks typically lag their large regional bank counterparts by asset size, geographic footprint and product/revenue diversification. As such mid-tier regional banks are more susceptible to idiosyncratic risks such as geographic or single-name concentrations. The majority of institutions within this group have retail branch networks that reside in contiguously located state geographies - typically three to four different states. Earnings for the mid-tier group are down year over year due to net interest margin compression. Fitch believes core earnings will continue to be challenged in 2014. Earnings face challenges from reduced fee income as mortgage refinance activity and loan prepayment fees are expected to slow in 2014. Although core margins have largely bottomed out for the majority of the mid-tier group, some banks face continued margin compression as the impacts of purchase accounting impact many banks in the mid-tier bank group who have completed acquisitions in recent years. Nonperforming asset (NPA) levels continue to improve across the industry yet remain well above historical levels. NPAs for the mid-tier group averaged 2.9%, which remains well above the sub 1% norm prior to 2007. Fitch expects continued gradual NPA improvement in the near term. Credit costs were low in 2013, with net charge offs (NCOs) averaging approximately 30 basis points (bps). This is down significantly from its peak in 2009 when NCOs averaged 1.9% for the group. Loan growth was strong for the mid-tier group with commercial lending leading the way in 2013. Fitch remains cautious of commercial loan growth. Competitive pricing and easier terms offered by U.S. banks on commercial and industrial (C&I) loans likely signal weakening asset quality for many commercial lenders. Fitch expects some deterioration in C&I credit quality over the medium term, particularly in a rising rate scenario, with smaller banks potentially facing greater risks as a result of their more recent entry into this loan space. The average tangible common equity level for the group was down to 7.96% from 8.14%. Lower capital levels were driven by relatively weak earnings which pressured shareholder returns through share repurchases, asset growth and increasing dividends. That said, the group remains well positioned for Basel III capital regulations. RATING OR OUTLOOK CHANGES Associated Banc-Corp (ASBC) ratings were upgraded to 'BBB'/'F2' from 'BBB-'/'F3'. The Rating Outlook was revised to Stable from Positive. ASBC's individual press release can be accessed here: here First Niagara Financial Group, Inc. (FNFG) ratings were affirmed at 'BBB-'/'F3'. The Rating Outlook was revised to Stable from Negative. FNFG's individual press release can be accessed here: here First Republic Bank's (FRC's) ratings were upgraded to 'A-'/'F1' from 'BBB+'/'F2'. The Rating Outlook was revised to Stable from Positive. FRC's individual press release can be accessed here: here PBCT's ratings were affirmed at 'A-'/'F1'. The Rating Outlook was revised to Negative from Stable. PBCT's individual press release can be accessed here: here RATING AFFIRMATIONS BOK Financial Corporation (BOKF) ratings were affirmed at 'A'/'F1'. The Rating Outlook remains Stable. BOK's individual press release can be accessed here: here Cathay's General Bancorp (CATY) ratings were affirmed at 'BB+'/'B'. The Rating Outlook remains Stable. CATY's individual press release can be accessed here: here Cullen/Frost Bankers, Inc. (CFR) ratings were affirmed at 'A'/'F1'. The Rating Outlook remains Stable. CFR's individual press release can be accessed here: here City National Bancorp (CYN) ratings were affirmed at 'A-'/'F1'. The Rating Outlook remains Stable. CYN's individual press release can be accessed here: here East West Bancorp (EWBC) ratings were affirmed at 'BBB'/'F2'. The Rating Outlook remains Stable. EWBCs individual press release can be accessed here: here First Horizon National Corp. (FHN) ratings were affirmed at 'BBB-'/'F3'. The Rating Outlook remains Stable. FHN's individual press release can be accessed here: here FirstMerit Corporation (FMER) ratings were affirmed at 'BBB+'/'F2'. The Rating Outlook remains Stable. FMER's individual press release can be accessed here: here First National of Nebraska, Inc. (FNNI) ratings were affirmed at 'BBB-'/'F3'. The Rating Outlook remains Positive. FNNI's individual press release can be accessed here: here Fulton Financial Corp. (FULT) ratings were affirmed at 'BBB+'/'F2'. The Rating Outlook remains Stable. FULT'S individual press release can be accessed here: here Hancock Holding Company's (HBHC) ratings were affirmed at 'BBB+'/'F2'. The Rating Outlook remains Stable. HBHC'S individual press release can be accessed here: here Synovus Financial Corp. (SNV) ratings were affirmed at 'BB'/'B'. The Rating Outlook remains Positive. SNV's individual press release can be accessed here: here TCF Financial Corp. (TCB) ratings were affirmed at 'BBB-'/'F3'. The Rating Outlook remains Negative. TCF's individual press release can be accessed here: here UMB Financial (UMBF) ratings were affirmed at 'A+'/'F1+'. The Rating Outlook remains Stable. UMB's individual press release can be accessed here: here Webster Financial Corp.'s (WBS') ratings were affirmed at 'BBB'/'F2'. The Rating Outlook remains Stable. WBS' individual press release can be accessed here: here Wintrust Financial Corp. (WTFC) ratings were affirmed at 'BBB'/'F2'. The Rating Outlook remains Stable. WTFC's individual press release can be accessed here: here Contact: Primary Analyst Jaymin Berg, CPA Director +1-212-908-0368 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at ‘www.fitchratings.com’. 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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