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By Jonathan Stempel
NEW YORK, June 17 (Reuters) - Standard & Poor’s lowered its credit ratings on 18 U.S. banks on Wednesday, saying increased regulation and market volatility will hurt the already weakened sector.
The downgrades were announced hours before President Barack Obama laid out his plan to revamp U.S. financial regulation to limit the risk that excessive risk-taking could trigger another global credit and economic crisis and as 10 large U.S. banks repaid more than $68 billion of federal bailout money.
BB&T Corp (BBT.N), Capital One Financial Corp (COF.N), Regions Financial Corp (RF.N), U.S. Bancorp (USB.N) and Wells Fargo & Co (WFC.N) were the largest banks whose ratings were lowered, although all still retained investment grades.
“The banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions,” S&P analyst Rodrigo Quintanilla wrote.
“Financial institutions are now shedding balance sheet risk and altering funding profiles and strategies for the marketplace’s new reality. Such a transition period justifies lower ratings.”
S&P said it cut the credit rating for San Francisco-based Wells Fargo, the fourth-largest U.S. bank, to “AA-minus” from “AA.”
It said it also cut BB&T to “A” from “A-plus,” Capital One to “BBB” from “BBB-plus,” Regions to “BBB-plus” from “A” and U.S. Bancorp to “A-plus” from “AA.”
Lower credit ratings can increase banks’ borrowing costs, and boost the amounts that investors demand to protect debt against default through credit default swaps.
Ratings were also cut on Associated Banc-Corp ASBC.O, Astoria Financial Corp AF.N, Carolina First Bank, Citizens Republic Bancorp Inc CRBC.O, Comerica Inc (CMA.N), Fifth Third Bancorp (FITB.O), KeyCorp (KEY.N), Susquehanna Bancshares Inc SUSQ.O, Webster Financial Corp (WBS.N), Whitney Holding Corp WTNY.O and Wilmington Trust Corp WL.N.
U.S. Bancorp was among 10 large U.S. banks to say on Wednesday they repaid money taken from the government’s $700 billion Troubled Asset Relief Program. JPMorgan Chase & Co (JPM.N) repaid the most, $25 billion.
The Standard & Poor’s Financials Index .GSPF fell 2.6 percent on Wednesday. (Reporting by Jonathan Stempel; additional reporting by Natalie Harrison in London; editing by Andre Grenon)