Standard & Poor's cuts ratings on 18 banks

Credit ratings agency Standard & Poor's on Wednesday cut ratings on 18 banks amid concern about further weakening in the financial sector.

S&P said the changes reflected its assessment that volatility will remain in the financial sector and the industry is expected to face tighter regulatory oversight. S&P also said loan losses, which have plagued the industry for more than a year, are likely to continue to increase and could grow beyond expectations.

BB&T Corp., Capital One Financial Corp., Regions Financial Corp. and Wells Fargo & Co. were among the largest banks that saw their ratings cut by S&P.

Widescale changes to the industry because of the credit crisis and ongoing recession will dramatically alter the banking landscape, S&P credit analyst Rodrigo Quintanilla said in a release.

"We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions," Quintanilla said. "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."

S&P did note that recent capital raising efforts in the sector will help defray some of the losses banks are facing.

Lower credit ratings make it more expensive for companies to borrow money and can sometimes lead to difficulty accessing credit. Low ratings can also affect investments in a company's debt as some institutional investors are required to only hold debt rated at a certain level.

Ratings were also cut on Associated Banc Corp., Astoria Financial Corp., Carolina First Bank, Citizens Republic Bancorp Inc., Comerica Inc., Fifth Third Bancorp, Huntington Bancshares Inc., KeyCorp, Susquehanna Bancshares Inc., Synovus Financial Corp., U.S. Bancorp, Webster Financial Corp., Whitney Holding Corp., and Wilmington Trust Corp.

The ratings of Carolina First Bank, Citizens Republic Bancorp, Huntington Bancshares, Synovus Financial and Whitney Holding were cut to junk status from investment-grade levels. The other banks all saw their ratings remain at investment-grade levels.

(This version CORRECTS to say ratings were cut on only 18 banks instead of 22 to reflect details of S&P report, and deletes First National Bank of Omaha, M&T Bank Corp., PNC Financial Services Group and Valley National Bancorp whose ratings were NOT cut.)