Moody’s snips BankUnited, subsidiary

Moody's Investors Service said it downgraded all long-term ratings and assessments of BankUnited, Inc. and its bank subsidiary BankUnited, NA (together BankUnited). Moody's downgraded BankUnited, NA's long-term issuer rating to Baa3 from Baa2. The agency also cut the senior unsecured shelf and subordinated shelf ratings were downgraded to (P)Baa3 from (P)Baa2, subordinate and senior unsecured ratings were downgraded to Baa3 from Baa2, local-currency preferred shelf non-cumulative rating was downgraded to (P)Ba2 from (P)Ba1, and local-currency preferred shelf rating was downgraded to (P)Ba1 from (P)Baa3, respectively.

Moody’s changed the outlook to stable from negative.

“The ratings downgrade reflects two key factors –– a meaningful erosion in BankUnited's profitability over the past year and an increased reliance on more expensive Federal Home Loan Banks (FHLB) advances and brokered deposits, which we view as less stable funding. Additionally, the downgrade reflects a decline in the U.S. bank sector's macro profile, a key input in bank ratings, from very strong - to strong + earlier this year, driven primarily by reduced deposit stability and weaker liquidity across the U.S. banking system,” Moody’s said in a press release.

The agency also noted BankUnited’s profitability is weaker than many of its peers with net income to tangible assets of 0.6% over the first nine months of 2023, down from 0.77% in 2022 and around 1% pre-pandemic though its capital positive has strengthened. The bank’s tangible common equity over risk-weighted asset (RWA) ratio increased to 11.4% in Q3 from 10.95% in Q4 2022 and is expected to continue rising.

“The change in the outlook to stable from negative reflects Moody's view that moderate downside risks are reflected at the current rating level and that its financial performance over the outlook horizon is not expected to deviate meaningfully from our expectations,” the agency said.

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