Fitch Takes Rating Actions on Large Regional Banks Following Peer Review
--BB&T Corporation (BBT);
--Capital One Financial Corporation (COF);
--Comerica Incorporated (CMA);
--Fifth Third Bancorp (FITB);
--Huntington Bancshares Inc. (HBAN);
--MUFG Americas Holding Corporation (MUAH);
--PNC Financial Services Group (PNC);
--Regions Financial Corporation (RF);
--Wells Fargo & Company (WFC);
--Zions Bancorporation (ZION).
Fitch upgraded M&T Bancorporation's (MTB) IDR to 'A' from 'A-' reflecting the company's improving capital position, consistent and solid performance during a difficult operating environment. Additionally, Fitch views the company's strong franchise, veteran management team, and revenue diversification favorably. Fitch views the company's core strengths and profile solidly in-line with other 'A' rated peers. Although MTB's experienced an unusual delay to get the Hudson City transaction approved and still has its written agreement due to BSA/AML in place, Fitch believes these two events are neutral to its 'A' rating.
Fitch upgraded SunTrust Banks, Inc.'s (STI) IDR to 'A-' from 'BBB+' supported by improving earnings, the company's balanced and diverse business mix, and good asset quality. STI's earnings continue to exhibit improvement, and have since converged to large regional bank averages. STI's ratings also reflect the company's balanced consumer and commercial banking franchise, as well as a national mortgage banking franchise and a sizable and strong middle-market focused capital markets business. Lastly, STI reported continued asset quality improvement in the second quarter of 2015 (2Q15), with still very low balances of net charge-offs (NCOs) and continuing improvement in nonaccrual balances.
The upgrade of USB's IDR to 'AA' from 'AA-' is reflective of an institution that for several years now has set itself apart from peer institutions due to a number of competitive advantages and a strong operating culture. This has led to better earnings and credit performance than nearly all peer banks over multiple operating cycles, and Fitch believes USB is taking steps to extend its advantages compared to peer institutions.
Fitch believes USB's key competitive advantages relate to cost and its differentiated business franchise. First, over time has USB enjoyed a cost of funding advantage relative to peers primarily driven by its low-cost deposit base, which has allowed USB to profitably lower loan prices to keep or win new clients. While it is noteworthy that there has been some compression in the funding cost advantage in recent years amid very low interest rates, Fitch believes this advantage will become more evident should interest rates eventually rise at some point.
The Outlook for all 14 large regional banks is Stable.
Fitch has published Rating Action Commentaries for each of the large regional banks, which are available on www.fitchratings.com. These include each issuer's key rating drivers and rating sensitivities and lists of all rating actions taken.
For further discussion of the large regional bank sector in general, refer to the special report titled 'Large Regional Bank Periodic Review: Well Situated for Uncertainty Ahead,' to be published shortly.