Moody’s downgrades 10 regional banks as crisis pressures persist

Moody’s Investors Service downgraded the credit ratings of 10 regional banks and put six other lenders on notice that they’re under review, the latest blow to an industry still reverberating from the March banking crisis that led three firms to collapse.

The targeted banks remain vulnerable to nervous depositors and investors, risks from higher interest rates, and a weakening commercial real estate market, the credit rating agency said.

Those banks’ stock prices were down from 4 to 6% midmorning, dragging down the broader market.

The Dow Jones Industrial Average tumbled more than 400 points, while the S&P 500 and tech-heavy Nasdaq shed 1.1 and 1.5 percent, respectively.

The biggest bank to receive a downgrade was Buffalo-based M&T Bank, the 19th largest in the nation by assets, according to the Federal Reserve.

A number of larger banks are under review, including Bank of New York Mellon, U.S. Bancorp, State Street, and Truist Financial.

“Most banks’ deposits were flat or down only modestly, but the mix worsened, with non-interest-bearing deposits declining and banks paying more for deposits,” Moody’s analysts Jill Cetina and Ana Arsov wrote in a note accompanying the announcement.

“The resulting drop in net interest income and net interest margins eroded profitability and, thus, the ability to replenish capital internally.”