Standard & Poor's Ratings Services said Thursday it has lowered its ratings on Downey Financial Corp. due to concerns about the company's credit performance and profitability.
Downey Financial shares jumped $3.21, or 9.9 percent, to $35.65 in afternoon trading. The stock dropped from a 52-week high of $74.85 in May to a low of $21.64 on Jan. 22, before regaining some ground in the past week.
S&P cut Downey's investment-grade long-term ratings to "BBB-" from "BBB." The company's short-term ratings were lowered to "A-3" from "A-2."
"We took this action because of our increased concerns regarding Downey's credit performance and our expectation that credit costs and a prolonged difficult operating environment will continue to make profitability a challenge in the near term," said Standard & Poor's credit analyst Robert Hoban.
At the same time, the ratings service revised its outlook on Downey to "Stable" from "Negative."
The ratings service expects Downey to maintain very strong risk-adjusted capital measures, as well as good funding and liquidity.
S&P said it may reduce Downey's ratings further if economic and home price trends deteriorate beyond current expectations and add further credit losses and stress to the company's banking results and capital.
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