Key Takeaways
- Moody’s put six regional banks on a review for possible downgrades because of their exposure to potentially risky real estate loans.
- Those under review are First Merchants, F.N.B., Fulton Financial, Old National Bancorp, Peapack-Gladstone Financial, and WaFd.
- Moody’s said “higher-for-longer interest rates” highlight the risk banks face holding commercial real estate paper.
Shares of six regional banks declined Friday, a day after Moody’s placed them on a long-term ratings review for possible downgrades because of their substantial exposure to potentially risky real estate loans.
The six are First Merchants (FRME), F.N.B. (FNB), Fulton Financial (FULT), Old National Bancorp (ONB), Peapack-Gladstone Financial (PGC), and WaFd (WAFD).
‘Substantial Concentration in Commercial Real Estate (CRE) Loans’
Moody’s said that because each of them is “a regional bank with a substantial concentration in commercial real estate (CRE) loans,” they face “ongoing asset quality and profitability pressures as higher-for-longer interest rates continue to highlight” what it called the unique pressures of CRE on banks’ creditworthiness.
The analysts noted they would be watching for signs of negative impacts from CREs on the banks in determining whether or not to downgrade them. They added that “any such downgrade of the long-term ratings and assessments will likely be restricted to one notch.”
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