(Bloomberg) -- Two weeks after Moody’s Investors Service rattled financial stocks by cutting the ratings for a slew of US banks, S&P Global Ratings is downgrading and dimming its outlook for several more — citing a similar mix of pressures making life “tough” for lenders.Most Read from BloombergMusk Told Pentagon He Spoke to Putin Directly, New Yorker SaysBorrowers With $39 Billion in Student Loans Finally See ReliefS&P Joins Moody’s in Cutting US Banks Amid ‘Tough’ ClimateQuant Trader Doubles F
S&P lowered grades one notch for KeyCorp, Comerica Inc., Valley National Bancorp, UMB Financial Corp. and Associated Banc-Corp, it said Monday in a statement, noting the impact of higher interest rates and deposit moves across the industry.
Many depositors have “shifted their funds into higher-interest-bearing accounts, increasing banks’ funding costs,” S&P wrote in a note summarizing the moves. “The decline in deposits has squeezed liquidity for many banks while the value of their securities — which make up a large part of their liquidity — has fallen.”
The KBW Bank Index of major US banks has since slumped almost 7% — heading for its worst monthly performance since the collapse of three regional banks in March sparked a broad selloff.A spree of Federal Reserve interest-rate hikes is squeezing many small and midsize banks that for years paid little to attract customer deposits that fund loans and other assets on their balance sheets. Consumers and businesses now have more opportunities to earn higher returns elsewhere.
Federally insured banks were sitting on more than $550 billion in unrealized losses on their available-for-sale and held-to-maturity securities as of mid-year, S&P said.
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