Moody’s Downgrades Regional Banks and Reviews Banking Giants
Moody’s has downgraded several regional banks in the US due to weak earnings and unrealized losses. Banking giants like Bank of New York Mellon and US Bancorp are also under review for potential downgrades. Moody’s highlights profitability pressures and high exposure to commercial real estate as major risks for the banking sector.
US Banks Face Challenges
US banks are expected to struggle in generating capital due to profitability pressures. The high interest rate environment and the possibility of a mild recession in 2024 further pose risks to asset quality and commercial real estate portfolios. Federal Reserve survey data reveals weaker loan demand and tighter credit standards in Q2.
Crisis of Confidence in the Banking Sector
The US banking sector has already experienced a crisis of confidence this year, with several banks collapsing. Moody’s warns that banks with high unrealized losses are at risk of facing similar challenges. The current high-interest rate environment contributes to the uncertainty.
Fitch Ratings Downgrades US Government’s Credit
Fitch Ratings has downgraded the US government’s credit to AA+ due to high rates and the country’s high debt-to-GDP ratio. The agency suggests that the government will struggle to manage growing interest payments as it rolls over existing debt at higher borrowing rates. Annual interest payments have reached approximately $1 trillion.
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