Moodys Threatens To Downgrade Up to 16 Banks

Posted on 08/08/2023

After downgrading 10 regional banks this week, Moodys has six larger banks in the U.S. under watch as a possible downgrade looms. Although reported as causing a “broad sell-off” the fact is investors have largely shrugged off Moodys’ threat, as judged by the minimal impact on bank prices today. State Street and Bank of New York Mellon, US Bancorp (U.S. Bank), Truist Financial, Cullen/Frost Bankers, and Northern Trust are under the microscope. Moodys says they have “ongoing strain” due to exposure to real estate, funding costs, and fewer deposits. Higher funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial real estate loans amid weakening demand for U.S. office space are among strains prompting the review, Moody’s said in a series of notes late Monday. Banks including Fifth Third Bancorp have said that they’ve stopped originating office loans. The delinquency rate for CMBS tied to offices rose in recent months to 4.96% in July 2023, up from 1.62% 12 months ago.

On another note, the New York Federal Reserve reported that total credit card indebtedness rose by US$ 45 billion in the April-through-June 2023 period, an increase of more than 4%. This brought the total amount owed to US$ 1.03 trillion, the highest gross value in Fed data going back to 2003. Total household debt went higher by about US$ 16 billion to US$ 17.06 trillion, also a new record.

Citigroup is lowering its Chicago office space footprint by two thirds in a move to Schaumburg. Citigroup signed a lease for 49,400 square feet across two floors in the Schaumburg Corporate Center at 1515 East Woodfield Road. Citigroup will relocate to the northwest suburb when its 146,000-square-foot lease at 50 NW Point Boulevard in Elk Grove Village expires at the end of the 2023.

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