Standard & Poor's (S&P) Ratings Services - a division
The McGraw-Hill Companies, Inc
) - lowered its rating outlook on
). The agency downgraded the company's rating outlook to
'Negative' from 'Stable'. Further, it affirmed BB&T's ratings
at 'A-'. This revised outlook follows the Federal Reserve's
rejection of BB&T's capital plan.
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The downgrade of rating outlook was driven by unanticipated
weaknesses in BB&T's risk-management processes. Last week,
the Fed had rejected the company's capital plan citing
qualitative reasons. S&P noticed deficiencies in BB&T's
capital planning process, which might have included flawed
corporate governance, unresolved supervisory issues,
risk-management processes, unsatisfactory assumptions about the
capital plan and an unstable capital distribution.
Further, S&P noted that BB&T's re-calculation of its
risk-weighted assets (RWAs) had led to an increase in RWAs. This
subsequently had led to lower capital ratios than predicted by
However, S&P expects BB&T to resubmit its capital plan
before the end of the second quarter. S&P also expects the
company to amend any process-oriented issue cited by the Fed.
Earlier this month, Moody's Investors Service - the rating arm of
) - also downgraded BB&T and its subsidiaries' outlook to
'Negative' from 'Stable'. However, it affirmed senior debt rating
of 'A2' and deposit rating as well as baseline credit rating of
The primary reason for downgrade was BB&T's readjustment of
its risk-weighted assets related to unfunded lending commitments,
which affected its capital ratios.
Currently, BB&T retains a Zacks Rank #3 (Hold). Among other
) is worth a look with a Zacks Rank #2 (Buy).