The U.S. banking sector now has reasons to rejoice with Standard
& Poor's Ratings Services' revision of the outlooks on 4
regional U.S. banks - BancorpSouth, Inc. ( BXS ),
Huntington Bancshares Inc. ( HBAN ),
Regions Financial Corp. ( RF ), and
Susquehanna Bancshares, Inc. ( SUSQ ) - to positive
Additionally, the rating agency upgraded Zions
Bancorp. ( ZION ) and
Citigroup Inc. 's ( C ) operating
subsidiaries to stable from negative. The agency has also affirmed
the ratings on these banks.BANCORPSOUTH (BXS): Free Stock Analysis ReportCITIGROUP INC (C): Free Stock Analysis ReportHUNTINGTON BANC (HBAN): Free Stock Analysis
ReportREGIONS FINL CP (RF): Free Stock Analysis
ReportSUSQUEHANNA BSH (SUSQ): Free Stock Analysis
ReportZIONS BANCORP (ZION): Free Stock Analysis
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Reasons for the Upgrade
The rating agency considers economic risks in the U.S. to have
considerably subsided based on the recovery of the housing sector.
This has resulted in a sizeable reduction in credit losses and
improvement in credit quality across all loan categories for about
the past 3 years. Standard & Poor's anticipates that credit
losses are likely to decline to $58-$60 billion level in 2013 and
further to $55-$58 billion level in 2014.
With the possibility increased domestic credit provided to the
private and housing sector, the rating agency believes that the
economic recovery in the U.S. will get an added impetus.
Besides these factors, the outlook revision for Citigroup's
operating subsidiaries reflects the bank's sustained progress in
reducing problem assets from the Citi Holdings unit. For Zions, the
revision indicates an ease of the previous concerns related to the
company's exposure to commercial real estate loans and unrealized
losses from the securities portfolio. Zions' capital position is
also poised to benefit from lower economic risks in the U.S.
Moreover, the outlook revisions consider other company-specific
factors, including a possible improvement in asset quality,
profitability and business stability as compared to rival
However, there is a lingering question as to whether the economy
has returned to its pre-crisis state. We believe that though the
rating upgrade reflects a favorable equity and asset market
backdrop, together with decreasing unemployment, a progressive
housing sector and a flexible monetary policy, the banking sector
still has a long way to go.
U.S. banks started 2013 with aggressive expense control, a sound
balance sheet, an uptick in mortgage activity and lesser credit
loss provisions in the first quarter.
Moreover, U.S. banks are actively responding to legal and
regulatory pressures, thereby proving their competence in bracing
challenges. Overall, structural changes in the sector will continue
to impair business expansion. However, entering the new capital
regime will ensure long-term stability and security for the
Though the improving performance by the banks seems already priced
in and there remain significant concerns, the sector's performance
in the upcoming quarters is not likely to disappoint
Notably, the revision in outlook of the banks by S&P is a
significant movement towards growth.