Standard & Poor's said on Monday it will review credit ratings on US regional banks after another quarter of large losses and deteriorating asset quality. Most banks reported losses or declines in earnings for the first quarter as they were forced to raise loan-loss provisions and add to reserves, S&P analyst Catherine Mattson said in a statement.
Net interest margins, or NIMs, contracted across the sector, even as interest rates remained low and core deposits rose, she said. That was mostly due to interest rates on loans resetting at lower levels and an increase in non-performing loans. "Despite these factors, we expect NIMs to improve going forward as higher-cost deposits mature," said Mattson.
Capital ratios were little changed in the quarter after receiving a strong boost in the fourth quarter from the government's troubled asset relief program, or TARP. Performance continued to diverge across the sector, said Mattson.
S&P will examine its ratings on the sector in absolute terms and relative to peers given its increasingly negative outlook for the industry and expectation that asset quality and profitability will come under even more pressure in 2009 and 2010, she said.
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