Standard & Poor's (S&P) has lowered its long-term issuer credit ratings on four US regional banks with large energy exposures.
The ratings agency took action after a review of banks with large energy loan portfolios as a percentage of both total loans and Tier 1 capital.
"We are in the early innings of the downturn, in our view, and we expect loan losses to rise over the next two years, even if energy prices rebound modestly from current levels," said S&P.
BOK Financial, Comerica, Cullen/Frost Bankers and Texas Capital Bancshares were among a group of US banks given negative outlooks by S&P at the end of last month, and S&P said last night that it had taken further action given that, since January, "energy prices have declined by more than one-third and the asset quality of energy loan portfolios has deteriorated materially, albeit from fairly benign levels".
"Given further declines in energy prices in recent months, less hedging activity by borrowers, and potentially more difficulty for borrowers to cure (i.e., resolve) borrowing base deficiencies through capital raises or asset sales, we think troubled debt restructurings and NPAs (non-performing assets) in the energy sector will increase, possibly sharply, in coming quarters," S&P said.
The oil price fell again yesterday, with Brent crude hovering near the $30 mark.