Fitch downgrades PacWest, citing 'deterioration' of key capital ratio

Abstract

The credit rating agency Fitch Ratings has downgraded PacWest Bancorp and its banking subsidiary, Pacific Western Bank, citing the company's recent decline in capital reserves. In a press release Wednesday, Fitch announced the revision of PacWest's long-term issuer default rating from "BBB" to "BBB-" and blamed the downgrade on the "Rapid, growth-driven deterioration" of the bank's common equity Tier 1 ratio. The Los Angeles-based bank's CET1 ratio fell to 8.2% during the second quarter, down from 10.4% during the year-ago period. The recent capital raise, other capital-enhancing strategies and even PacWest's expectation of lower levels of loan growth during the back half of the year may not be enough "To reverse [the] CET1 trajectory by year-end," Fitch warned in the release. Commercial banking Who are banking's longest-tenured CEOs? The chief executives at 11 large and regional banks have been on the job for 21 years or more. The Federal Reserve requires all banks to maintain a CET1 ratio of at least 4.5%.Wednesday's downgrade comes nearly four months after Fitch issued a "Negative outlook" for PacWest's long-term issuer default rating, based on the ongoing deterioration of the company's CET1 ratio. On Wednesday, Fitch praised PacWest's record of "Strong asset quality, low credit losses, consistent financial performance and stable deposit base" and said the short-term issuer default rating for PacWest would remain unchanged, while the rating outlook is now "Stable."PacWest is embarking on a CEO transition.