MUMBAI (Thomson Financial) - Moody's Investors Service signalled it may lower its ratings on Huntington Bancshares Inc and its units after Huntington said it will take a 300 mln usd charge from exposure to Franklin Credit Management Corp.
On Nov 15 Franklin -- a mortgage lender who raises money by borrowing from Huntington -- said it needs to set aside a 'substantial' amount of cash because many of its loans are not likely to be repaid.
Moody's stated several reasons for initiating the review on Huntington: First, the size of the remaining net exposure to Franklin -- in excess of 1 bln usd -- is substantial and additional write-downs are a possibility in Moody's view. Second, the write-down will result in a sizable fourth-quarter net loss and, combined with a large quarterly dividend, will result in a material deterioration in Huntington's capital ratios. Finally, Huntington is also at risk of a further deterioration in the credit quality of its loan portfolio, particularly in its Commercial Real Estate (CRE) exposures.
A substantial portion of Huntington's CRE footprint is in Eastern Michigan and Northern Ohio -- a region of the United States where this asset class has come under significant strain.
The agency placed Huntington Bancshares' 'A3' long-term debt and 'P-2' rating for short-term obligations on review for possible downgrade. Also on review are Huntington's lead bank, Huntington National Bank's 'C+' financial strength rating, 'A2' long-term deposits rating and 'P-1' short-term deposits rating.
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