Fitch Affirms and Withdraws Webster Financial's 'BBB' IDR
KEY RATINGS DRIVERS - IDRs, VRs, AND SENIOR DEBT
WBS' rating affirmation reflects its solid Connecticut franchise and operating performance and asset quality in line with its rating category. Moreover, WBS has further strengthened its franchise through the third-quarter 2014 (3Q'14) announced acquisition of JP Morgan's health savings account (HSA) business. The HSA business provides a solid source of long-duration deposit funding for the WBS, which will be a benefit to the bank over the long term.
Fitch views WBS' earnings profile as being representative of its rating category. Earnings measures are solid and finished above 2014 the mid-tier median peer level. Earnings are relatively more concentrated in spread revenues than its peers. However, WBS has maintained a more stable net interest margin than its peers.
WBS solid earnings are due in part to relatively stronger operating leverage than its peers. In addition, WBS' earnings profile is also aided by a relatively higher yielding securities portfolio due to a sizeable CMBS portfolio, which has had strong performance. Over 25% of WBS' securities portfolio is invested in higher yielding and relatively riskier, non-government guaranteed securities.
Asset quality is also an attribute that Fitch views representative of WBS' rating category. Although nonperforming assets (NPAs) rank in the top quartile of the mid-tier group at over 2.7%, this number is significantly impacted by WBS' conservative approach to trouble debt restructure (TDR) identification which Fitch includes in its NPA calculation. Over 50% of the bank's nonperforming assets are performing TDRs. As a result, Fitch expects WBS' NPA levels to continue to rank in the top quartile of the mid-tier bank group since TDRs retain their classification for the life of the loan.
Capital levels, although adequate, represent a modest weakness relative to WBS' rating. WBS' tangible common equity ratio was 7.45% at the end of 2014, which ranks in the bottom quartile of the mid-tier bank group.
RATING SENSITIVIES - IDRs, VRs, AND SENIOR DEBT
Rating sensitivities are no longer relevant given today's rating withdrawal.
KEY RATING DRIVERS - LONG AND SHORT TERM DEPOSIT RATINGS
Webster Bank's uninsured deposit ratings are rated one notch higher than WBS' IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. Fitch believes U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.
RATING SENSITIVITIES - LONG AND SHORT TERM DEPOSIT RATINGS
Rating sensitivities are no longer relevant given today's rating withdrawal.
KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating of '5' and Support Ratings Floor of 'NF' reflect Fitch's view that WBS and Webster Bank are not considered systemically important and therefore, the probability of support is unlikely.
RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR
Rating sensitivities are no longer relevant given today's rating withdrawal.
KEY RATING DRIVERS - HOLDING COMPANY
The IDR and VR of WBS are equalized with those of its chief operating company, Webster Bank, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries.
RATING SENSITIVITIES - HOLDING COMPANY
Rating sensitivities are no longer relevant given today's rating withdrawal.
Fitch has affirmed and withdrawn the following ratings with a Stable Outlook:
Webster Financial Corporation
--Long-term IDR 'BBB';
--Short-term IDR 'F2';
--Senior debt 'BBB';
--Viability Rating 'bbb';
--Preferred stock 'B+';
--Support'5';
--Support Floor 'NF';
Webster Bank, NA
--Long-term IDR 'BBB';
--Short-term IDR 'F2';
--Viability Rating 'bbb';
--Long-term deposits 'BBB+';
--Short-term deposits 'F2';
--Support '5';
--Support Floor 'NF';
WBS DID NOT PARTICIPATE OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE.
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