“The downgrade reflects S&P Global Ratings’ view that higher interest rates will continue to pressure profitability for longer and to a greater degree at Key than at Category IV bank peers,” S&P Global Ratings said.S&P wrote that depositors have “shifted their funds into higher-interest-bearing accounts, increasing banks’ funding costs.”AFP via Getty Images
Analysts at the agency warned that high interest rates threaten the value of loans for borrowers who may need to refinance. “Banks with material exposures to commercial real estate, especially in office loans, could see some of the greatest strains.”S&P’s analysis sent bank stocks lower just before the opening bell on Wall Street on Tuesday.
Earlier this month, Moody’s cut the ratings on 10 smaller banks and put six larger institutions on notice that included US Bancorp, Bank of New York Mellon, State Street and Truist Financial.