Fitch places 9 US banks on negative watch

Fitch Ratings on Friday place nine U.S. banks on a negative watch after it determined the institutions have vulnerability to continued credit deterioration.

Six of the nine banks _ BB&T Corp., Fifth Third Bancorp, KeyCorp, Regions Financial Corp., SunTrust Banks Inc. and Wells Fargo & Co. _ were among the 19 financial institutions that underwent stress tests by the government in recent weeks to determine their potential capital needs if the economy worsens.

Discover Financial Services, M&T Bank Corp. and Popular Inc. are the other three.

The actions come after the bond rating agency conducted a review of U.S. banks earlier this month, amid expectations for increased loan losses in the coming quarter.

"While credit deterioration has been apparent for some time in riskier classes of residential mortgages, as well as in home equity loans and residential construction loans, loss trends have continued to worsen and additional asset classes have been impacted," Fitch said in a statement. The agency also noted that credit card loss rates have spiked in the past two quarters.

Fitch said it will continue to assess the capital positions of the financial institutions put on negative watch, particularly those who have been asked to raise more capital to withstand a deepening recession.

The U.S. government's "stress tests" last week showed Fifth Third, KeyCorp, Regions Financial, SunTrust and Wells Fargo all needed to raise capital to make sure they were strong enough to withstand even worse economic conditions.

The majority of the downgrades, if they occur, will be limited to one notch, Fitch said. A ratings downgrade makes it more expensive and sometimes more difficult for a company to issue debt or receive loans.