Moody's puts six regional banks on downgrade review

The regional banking sector is in focus on Friday as credit agency Moody's (MCO) has placed the ratings of six different US regional banks under review for a potential downgrade. Notable names such as Old National Bancorp (ONB), Peapack-Gladstone (PGC), and Fulton Financial (FULT) have been placed under review.

Yahoo Finance's Madison Mills and Seana Smith break down the details.

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This post was written by Angel Smith

Video Transcript

Moving on to moody setting sights on six us regional banks placing a downgrade review amid concerns over commercial real estate exposure.

Some of the lenders on the list including merchants for some Financial and Old National Bank Corp. You can see that some of those names moving to the downside this morning, big movement for Old National Bank Corp down over 1%.

Not a massive surprise.

When you think about the pressure that regional banks have been under amid the higher interest rate environment pushing a lot of deposits out.

We've seen this flight to quality and higher rates, things like high yield savings accounts.

This is why we've seen such positive movement in the big banks.

When we talk about earning season kicking off with the likes of JP Morgan, Goldman, Sachs Morgan Stanley, that pain is going to be felt elsewhere.

And these are companies that don't necessarily have the capital on hand to be able to withstand the hire for a longer environment that's causing that deposit flight, but also causing issues with their own balance sheets through things like commercial real estate pressure, Shana.

Yeah, exactly.

And we've really seen investors take note and focus more in on some of these names following everything that's played out with New York Community Bank Corp and, and their exposure to the commercial real estate uh sector.

More specifically, that wasn't very much a regional story, very much focused on New York.

But again, when it comes to these names, again, a very, very similar picture.

So not necessarily a huge surprise, given the fact that Mooney's has placed these six regional banks on review for a downgrade.

So the the talk about the CRE and and the weakness there has kind of started to quiet just a bit and we did start to see maybe a shift in narrative to a surrounding cr A.

But I think the worrisome calls out there from many who are closely tracking the sector is that still this is an issue that could be with us here for years to come.

As many more of the loans become due as many more of the uh leases are tried to be renewed.

And that could be a real issue here in the coming years, which is still caused many people to stick with their initial calls that this could be the next shoe to drop when it comes to some of the weakness that we could see here within the economy.