Recently, Fitch Ratings concluded the peer review of 16
mid-tier regional banks including
Webster Financial Corp
). 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+.'
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
). 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
) 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
) and TCF Financial Corporation were downgraded since these have
a weak asset quality, comparatively higher funding costs and
risks related to balance sheet.
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
CATHAY GENL BCP (CATY): Free Stock Analysis
FULTON FINL (FULT): Free Stock Analysis
WEBSTER FINL CP (WBS): Free Stock Analysis
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