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Fitch cuts Synovus Financial ratings Wallace Witkowski, MarketWatch 9-15 Fitch Ratings late Monday downgraded the ratings of Synovus Financial Corp. and its subsidiary banks because of prolonged credit stress at the company. Among the downgrades, Fitch cut Synovus' long-term issuer default rating to A- from A, and its subordinated debt rating to BBB+ from A-. The outlook remains negative. S&P maintains 'A-' credit rating on Synovus AP 9-11 Credit ratings agency Standard & Poor's said Thursday the ratings of Synovus Financial Corp. were unaffected by the bank's plan to cut its dividend by 65 percent. Synovus currently carries an investment-grade "A-" rating from S&P. On Wednesday, Synovus said it was cutting its dividend to 6 cents per share from 17 cents per share in an effort to preserve capital. Many banks have slashed their dividends in recent months amid the continued downturn in the credit and mortgage markets. "The dividend cut should preserve approximately $144 million in capital a year, boosting Synovus's already strong capital base in the face of its pressured credit performance and elevated net charge-off levels, which reached an annualized 1.04 percent in second-quarter 2008," Standard & Poor's said in a statement. S&P said continued increases in charge-offs -- loans written off as not being repaid -- above expectations could pressure earnings and lead to a ratings cut. S&P maintained a negative outlook on the stock, which means there is a one-in-three chance the rating could be cut in the next two years. S&P Cuts Ratings on National City & First Horizon Kathy Shwiff, WSJ 9-03 Standard & Poor's cut its ratings on two banks and warned of possible downgrades on two more as part of a broad review of U.S. regional banks. The rating agency affirmed the ratings of six banks but changed their ratings outlooks to negative from stable. The actions reflect "concerns around the ongoing deterioration in the mortgage and housing sectors," said credit analyst John K. Bartko. Banks have been suffering the consequences of the real-estate bust, and 10 banks have failed this year. Last week, rhe Federal Deposit Insurance Corp. raised to 117 the number of banks it has identified as in danger of failing, the largest number since mid-2003 and up from 90 at the end of the first quarter. S&P cut its ratings on National City and First Horizon National and warned of possible downgrades on Citizens Republic Bancorp and Fifth Third Bancorp. It affirmed its ratings on Colonial BancGroup, Comerica, Regions Financial, Synovus Financial, Wilmington Trust and Zions but changed the outlooks to negative from stable. S&P cut National City's counterparty credit rating one notch A-/A-2, noting the Cleveland-based bank's sizable concentration in the mortgage and housing sectors. It also reduced the long-term counterparty credit rating on National City's bank subsidiary one notch to A and affirmed its short-term counterparty credit rating on the bank subsidiary at A-1. The outlook is negative. A spokeswoman for National City said the A-long-term rating is in line with its rating by Moody's Investors Service, which was affirmed on July 24. "National City's ratings remain solidly investment grade and today's announcement has no impact our ability to serve our customers," said Kristen Baird Adams. She noted the company had recently raised $7 billion and its Tier 1 risk-based capital ratio of 11.1% as of June 30 "is the highest among our peers and all major U.S. banks." S&P cut its long-term counterparty credit rating on First Horizon one notch to BBB, which is two notches above junk status. It also reduced the counterparty credit rating on its subsidiary First Tennessee Bank N.A. Memphis one notch to BBB+/A-2. The outlook is stable. The ratings changes reflect First Horizon's conversion from "a diverse corporation with several national lines of business to a one-state regional banking organization, albeit with a leading market position in its home state of Tennessee and a capital markets enterprise that has yet to return to full profit potential," said credit analyst Catherine Mattson. On Tuesday, First Horizon completed the sale of its mortgage business to MetLife, and D. Bryan Jordan, its chief financial officer, took over as chief executive, effective Monday. S&P pointed out that First Horizon, which swung to a second-quarter loss amid a large boost to its provisions to cover bad loans, has seen credit deterioration at its retail bank and "we expect nonperforming assets and net charge-offs to remain high through the rest of 2008." However, the company's capital cushion improved after it issued $690 million of common equity in the second quarter, pushing its Tier 1 capital ratio to a strong 10.4%. Ratings & Dividend Changes - September On 9-05 a Robert W. Baird analyst cut his rating on MTB to "Neutral" from "Outperform," noting the stock has reached his price target following recent outperformance. "While we view M&T Bank as one of the higher-quality names in our coverage universe, year-to-date and recent outperformance has resulted in what we view as a more balanced risk/reward as shares have approached our price target," David George wrote in a note to clients. George also cut his target price on the stock by $3 to $72. George now anticipates full-year earnings of $5.76 per share, down from a previous estimate of $5.98 per share. Analysts polled by Thomson Reuters, on average, expect a profit of $5.72 per share in 2008. M&T Bank shares have gained 28% since mid-July. Shares are down 11% this year, a fairly modest decline compared with some regional banks that have lost more than half their value in 2008. On 9-10 analyst Jefferson Harralson of Keefe, Bruyette & Woods downgraded the shares of Synovus Financial, Bank of America, SunTrust and BB&T to "Underperform" from "Market Perform." "We believe certain bank stocks reached a bottom on July 15, 2008," Harralson said. "However, since that date, valuations have meaningfully improved while we believe the operating environment has not meaningfully improved." On 9-17 Citigroup Downgraded BBT from Buy to Hold. On 9-25 Sun Trust Rbsn Humphrey Downgraded FMBI from Buy to Neutral. On 9-22 Sandler O'Neill & Partners analyst R. Scott Siefers cut his rating on U.S. Bancorp to "Sell" from "Hold," noting that the recent run-up in share price favors paring back on positions in the stock. Shares rallied 12 percent last week to close at $37.99. "We suggest that investors use the stock's recent substantial strength as an opportunity to take profits or pare back positions, and to await such time until a better entry point reveals itself," Siefers wrote in a note to clients. Still, Siefers believes USB has the potential to weather the economic storm better than many of its peers, due to a strong management team and solid profitability. On 9-22 Sandler O'Neill & Partners analyst Joseph Fenech downgraded the shares of Valley National to "Sell" from "Hold," given the stock's current valuation. Shares rallied 23% last week. Fenech said his opinion of Valley National as one of the better-managed banks in his coverage area, with a valuable franchise, remains unchanged. "The company has no material credit issues to speak of, and while management has indicated that the company will likely record what could be a sizable charge related to its Fannie/Freddie preferred stock holdings, we view the exposure as quite manageable from a capital standpoint," Fenech wrote in a note to clients. "The bottom line is that we think the recent rally in the stock and the current valuation accorded Valley National shares leave little room for further share price appreciation." On 9-23 Robert W. Baird analyst David George downgraded the shares of M&T Bank to "Underperform" from "Neutral," due to the stock's current valuation. In a note to clients, analyst David George said the regional bank is one of the more attractive companies in his coverage area, but the stock already reflects that. "In addition to valuation considerations, we do not believe M&T is immune to the cyclical challenges facing the group, as we believe risk in the company's balance sheet has risen over the last few years," George wrote. Additionally, M&T has somewhat less capital flexibility than some of its peers to take advantage of new business opportunities. On 9-19 Fitch Ratings lowered its ratings outlook on Comerica to negative from stable because of rising levels of non-performing assets, weaker earnings, and a deterioration in capital ratios. Fitch has a A+ long-term issuer default rating, and a short-term IDR of F1 on Comerica. Ratings & Dividend Changes - August In a note to clients on 8-25, Citi analyst Greg Ketron upgraded BB&T to "Buy" from "Hold," noting the bank's improving margins and solid revenue growth. Ketron also raised his target price on the stock to $34 from $29. "Despite having a large homebuilder construction book, credit has held up as the markets BB&T operates in have not faced the overbuilding and home price declines other markets have experienced," Ketron wrote. What's more, the Winston-Salem, N.C.-based bank has been able to generate solid core revenue growth of 8 percent in the first half of 2008 in a difficult environment through loan and fee growth, Ketron said. BB&T has largely avoided exposure to investments that are proving problematic for many other banks, specifically, collateralized debt obligations, or CDOs, and structured investment vehicles. Additionally, Ketron said the bank's strong capital levels reduce the risk of a dividend cut or a dilutive capital raise. Ketron, trimmed his full-year profit estimate to $2.69 per share from $2.73 per share, on expectations for a slight increase in credit costs. Analysts polled by Thomson Reuters, on average, anticipate earnings of $2.77 per share in 2008. 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