Fitch Affirms Webster's Ratings - Analyst Blog
20 February 2013 - 4:55AM
Zacks
Recently, Fitch Ratings concluded the peer review of 16 mid-tier
regional banks including Webster Financial Corp.
(WBS). The long-term and short-term Issuer Default Ratings (IDRs)
of Webster and its subsidiaries were affirmed at 'BBB/F2' and the
outlook was maintained at ‘Stable.’
Banks with total assets ranging from $10 billion to $36 billion
come under mid-tier regional category. The other features include
homogenous business plans, dependency on spread income from loans
and investments as well as share repurchases. Further, mid-tier
banks lack geographical diversification as well diversified revenue
streams. IDRs for these banks are dispersed with a low of ‘BB-' and
a high of 'A+.'
Rating Rationale
Fitch affirmed the ratings of Webster owing to continuously
improving credit quality and profitability metrics.
As of Dec 31, 2012, Webster’s allowance for loan losses dipped
24.1% year over year to $177.1 million. Further, net charge-offs to
average loans (annualized) declined 61 basis points (bps) year over
year to 1.47%. In addition, ratio of nonperforming loans to total
loans fell 6 bps to 1.62% over the same time frame.
Fitch maintained its outlook on Webster at Stable. Continuously
improving asset quality and manageable level of credit losses were
the reasons behind the affirmation. Also, expectation of reduction
of not more than 25 bps in the tangible common equity ratio from
the third-quarter levels in the near term was another reason to
reiterate the ‘Stable’ outlook on Webster.
Rating Action on Other Banks
Besides Webster, Fitch has affirmed the IDRs of 12 banks including
Associated Banc-Corp (ASBC). Sufficient capital
levels, robust earnings and funding profile of these companies,
along with strong asset quality, prompted the rating agency to
affirm the ratings.
The IDRs of Cathay General Bancorp (CATY) and
First National of Nebraska were upgraded due to strong operating
performance and constantly improving credit quality as well as
sturdy capital levels. However, IDRs of Fulton Financial
Corporation (FULT) and TCF Financial Corporation were
downgraded since these have a weak asset quality, comparatively
higher funding costs and risks related to balance sheet.
Conclusion
Webster’s robust asset quality and profitability profile might
translate into further positive ratings. On the contrary, if
revenue, profitability and capital levels deteriorate, the company
might face rating downgrades.
Currently, Webster carries a Zacks Rank #2 (Buy).
ASSOC BANC CORP (ASBC): Free Stock Analysis Report
CATHAY GENL BCP (CATY): Free Stock Analysis Report
FULTON FINL (FULT): Free Stock Analysis Report
WEBSTER FINL CP (WBS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Cathay General Bancorp (NASDAQ:CATY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cathay General Bancorp (NASDAQ:CATY)
Historical Stock Chart
From Jul 2023 to Jul 2024