Magazine article American Banker

S&P Analyst Says Upgrades May Be Harder to Come By

Magazine article American Banker

S&P Analyst Says Upgrades May Be Harder to Come By

Article excerpt

Credit upgrades may become increasingly difficult for U.S. banks to attain, a Standard & Poor's Corp. official said on Monday.

The comment came as banks received their latest glowing report card from the rating agency - 13 U.S. banks were upgraded and only four were downgraded in the first half

But as bank ratings coalesce in the "low A" and "high BBB" area, the pace of upgrades may slow, said Robert Swanton, banking analyst at Standard & Poor's.

Bank capital levels are already so high that adding new capital will not be enough to justify upgrades in many cases, he said.

Eye on Fees

Instead, Standard & Poor's will be looking at a bank's ability to generate earning assets or fee income.

"Standard & Poor's believes the worst of the problems are over," he said. "But the banking franchise is being diminished and banks are under attack in some business lines, and we are looking for evidence that banks are improving their franchises."

Allerton Smith, bank debt analyst at First Boston Corp., said a ceiling on bank ratings is developing, with only the proven performers getting "high A" ratings.

He added that the double-A area is near unattainable for most U.S. banks, adding that Republic New York Corp. was the only bank holding company to be upgraded to the AA level in recent years.

General Improvement

The high level of bank upgrades was part of an overall improvement in credit quality in corporate America. Standard & Poor's said upgrades for all companies exceeded downgrades in the second quarter for the first time since the first quarter of 1989. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.