NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases 2017 U.S. Bank Rating Outlook Update including average key financial ratios by rating category, key rating factors, and financial trends.
Despite the recent exuberance surrounding equity markets, particularly for financial institutions, KBRA notes some existing and future headwinds, both internal and external, that could knock the proverbial wind out of the sails of U.S. banks. As outlined in the last U.S. Banking Outlook, the previously mentioned credit strengths of solid funding structures, improved asset quality metrics, thorough understanding of operating markets, and generally improved economic conditions still hold true for the vast majority of rated institutions. Further, Banks within the rated universe have been largely successful in supplementing growth with advantageous acquisition strategies that have proved to be credit positive for stakeholders. However, there is growing concern for continued growth in construction and development and commercial real estate lending activity, with banks often abutting or exceeding the Office of the Comptroller of the Currency concentration guidance limits. Further adding to this concern is evidence that suggests certain subsectors of commercial real estate have peaked in valuation and are due for an adjustment. Beyond correlation to real estate, rated banks face increasing pressure towards shareholder friendly capital management regimes that is pressuring capital levels. Additionally, while there will almost certainly be regulatory relief in some manner given the political landscape, the potential divergence in expectation and actuality givens rise to uncertainty for bankers, regulators, and markets generally.
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About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).