As the administration prepared to officially announce its proposed financial regulation overhaul, one credit rating agency had a critical eye trained on 22 US banks. Standard & Poor’s on Wednesday lowered ratings on 18 banks and revised its outlooks on four others, illustrating expectations of fallout over increased regulatory oversight and lower profitability from volatile financial markets. “We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions,” said Rodrigo Quintanilla, an S&P credit analyst, in the media statement. “Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality. Such a transition period justifies lower ratings as industry players implement changes.” The rating agency lowered BB&T‘s (MSDXP) counterparty credit rating to single-A from single-A plus and revised the outlook from watch negative to stable. It lowered Capital One Finance (COF) to triple-B from triple-B plus, pushed Citizens Republic Bancorp (CRBC) to double-B minus from triple-B minus and downgraded Comerica (COM) to single-A minus from single-A. S&P slashed Fifth Third Bancorp (FITB) to triple-B from single-A minus, lowered Huntington Bancshares (HBAN) to double-B plus from triple-B and lowered US Bancorp (USB) to single-A plus from double-A. It also lowered Wells Fargo‘s (WFC) rating to double-A minus from double-A and raised its outlook on PNC Financial Services Group (PNC) to stable from negative watch. “We believe some firms may be better able to weather the risks ahead than others,” Quintanilla added. “In the long term, we could foresee ourselves raising ratings if lower earnings and reduced risk are accompanied by stronger risk-adjusted capital and effective governance.” Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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