Moody's may cut ratings on 23 U.S. regional banks

NEW YORK, March 12 (Reuters) - Moody's Investors Service on Thursday said it may cut the bank financial strength ratings of 23 U.S. regional banks because the housing and economic crisis will lead to significantly higher credit losses than it earlier expected.

Moody's also put the deposit and debt ratings of 17 of those banks on review for downgrade and changed the outlook on 19 other regional banks to negative from stable, indicating a rating downgrade is likelier over the long term.

"Losses are likely to meaningfully weaken the capital position of many banks in 2009," Moody's managing director Robert Young said in a statement.

A sharp decline in commercial real estate prices, rising corporate defaults and deterioration in residential loan performance have raised expectations for losses, the agency said.

The banks likely to be downgraded are those with significant exposure to commercial real estate, specifically construction and land development, Moody's said.

Bank financial strength ratings placed under review for downgrade include KeyCorp (KEY.N), PNC Financial Services Group (PNC.N), SunTrust Banks Inc (STI.N) and U.S. Bancorp (USB.N).

For details click on [ID:nWNA8900].

Moody's also said capital has become more important in assessing banks' stand-alone financial strength.

"In today's environment, it is extremely difficult for banks to generate capital, both internally through earnings and externally through private sources," Young said, and so "low capital levels are an increasing threat to banks' sustainability." (Reporting by Dena Aubin; Editing by James Dalgleish)