Sign in Subscribe
Banks (Finance)

Webster Financial Corp. Hit by Credit Rating Cut by Standard & Poor's

Strategic Insights

— 2 min read

Webster Financial Corp., a Waterbury, Conn.-based bank, was one of 22 U.S. banks to see its credit rating cut by Standard & Poor's due to concerns about the severity of the recession. The agency lowered its rating of Webster to BBB- from BBB and placed its outlook on the company and its subsidiary, Webster Bank N.A., as "negative." This downgrade reflects the bank's asset-quality deterioration and the agency's expectation that non-performing assets will continue to rise in the severe recession. Webster's spokesman, Edward P. Steadham, stated that the rating cut was comparable to the average downgrade of two notches recorded among this group of banks since 2007, and that the company remains investment grade.

Key Takeaways:

  • 22 U.S. banks had their credit ratings cut by Standard & Poor's, including Webster Financial Corp., due to concerns about the severity of the recession.
  • The agency lowered its rating of Webster to BBB- from BBB and placed its outlook on the company and its subsidiary, Webster Bank N.A., as "negative."
  • The downgrade reflects Webster's asset-quality deterioration and the agency's expectation that non-performing assets will continue to rise in the severe recession.
  • Webster's most problematic asset-quality issues have been in its previously identified home equity and out-of-footprint residential construction portfolios.
  • The company's $156 million residential development portfolio has been identified as "another weak" portfolio "in our view."
  • Webster has reported recent quarterly net losses due largely to loan-loss provisions.
  • The agency believes there is a high probability that Webster may report a net loss in 2009, reflecting continued high loan-loss provisions.

Statistics:

  • 22 U.S. banks had their credit ratings cut by Standard & Poor's.
  • The agency lowered its rating of Webster to BBB-.
  • The outlook on Webster and its subsidiary, Webster Bank N.A., was placed as "negative."
  • Webster's asset-quality deterioration has led to a rise in non-performing assets.
  • The company's profitability has been below average.
  • Tangible common capital levels are below average.
  • The agency expects non-performing assets to continue rising in the severe recession.
  • Webster's most problematic asset-quality issues are in its home equity and out-of-footprint residential construction portfolios.
  • The company's $156 million residential development portfolio is considered "weak."
  • The agency believes there is a high probability of a net loss in 2009.

Sources:

  • "Webster Financial Corp. Downgraded by S&P; ABC will challenge Holland, N.Y.-based First Niagara, moving north as banks sees less N.Y. market potential: core business of branches" by Marc Silvestrini, Waterbury Republican-American, June 18, 2009.
  • Standard & Poor's report on Webster Financial Corp.
  • The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

Read more