Moody’s shifts MUFG Americas view to negative

Moody's Investors Service said it changed the rating outlook on both MUFG Americas Holdings Corp. and its bank subsidiary, MUFG Union Bank, NA to negative from stable. Concurrently, the agency affirmed their ratings.

“The company's key credit challenge remains its below-peer average profitability, which was the driver of the outlook change to negative. MUAH's net income was 0.3% of tangible banking assets for the first half of 2019 compared to the 1.3% median for a2 BCA U.S. peers. MUAH's low profitability is the product of a low net interest margin, which was 2.03%, an elevated cost/income ratio of 82.6%, and limited noninterest income. MUAH is executing a multi-year program to improve its operational efficiency, optimize its balance sheet, and enhance its revenue generation,” said Moody’s in a press release.

Moody's said it expects the strategic initiatives underway will result in continued higher expenses before yielding improvements in profitability and that higher profitability levels that are supportive of the current rating will be a longer-term task. The company had a net loss for the third quarter because of a $1.6 billion goodwill impairment, which had no implications for Moody's assessment because it is a non-cash charge and does not affect tangible common equity.

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