Major U.S. banks including U.S. Bancorp (USB), State Street Corp. (STT), and Bank of New York Mellon Corp (BK) were trending lower on Tuesday after Moody’s Investors Services put credit rating for these major U.S. banks under review. This follows the agency’s recent debt rating downgrade for several smaller and mid-sized banks.
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The U.S. banking industry, still recovering from the collapse of Silicon Valley Bank, faces ongoing challenges with interest rate, asset, and liability management risks, impacting liquidity and capital. Moody’s stated, “Many banks’ Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital” as a “mild recession looms and asset quality looks set to decline” particularly when it comes to the banks’ commercial real-estate portfolio.
Alongside the larger banks, Northern Trust Corp. (NTRS), Cullen/Frost Bankers Inc. (CFR), and Truist Financial (TFC) are also under review for potential downgrades.
Moody’s added, “Asset risk is rising, in particular for small and mid-size banks with large CRE exposures.” This news comes after Fitch downgraded U.S. debt last week.
U.S. banks have not fared well this year and it is reflected in the bank ETF, Invesco KBW Bank ETF (KBWB) down by more than 10% year-to-date.