Standard & Poor’s revises BancorpSouth outlook to Negative, citing weakening credit trendsBy AP
Tuesday, July 13, 2010
S&P revises BancorpSouth outlook to Negative
NEW YORK — Standard & Poor’s on Tuesday revised its outlook on BancorpSouth Inc. and its subsidiaries to “Negative” from “Stable,” citing concern about its outstanding loans deteriorating further.
S&P affirmed its “BBB+” long-term counterparty credit rating on BancorpSouth and its “A-/A-2″ counterparty credit rating on BancorpSouth Bank. Both are investment-quality ratings.
Credit analyst Dan Teclaw of S&P said the revision followed a disclosure of a “material weakness” of internal controls, by the bank and its auditor. That means the company was slow to recognize souring loans and losses in its portfolio.
In particular, S&P is concerned about the Tupelo, Miss. bank’s $580 million residential acquisition and development portfolio, especially in regions of Memphis, Tenn., and Alabama and Florida.
The portfolio represents only 5.9 percent of the bank’s outstanding loans. But, with $95 million in non-performing loans at the end of the first quarter, it makes up 38 percent of the company’s $236 million of non-performing loans — those that are past due and likely uncollectable.
BancorpSouth appears to have lent to stronger borrowers, but the continued weakness in the economy means they are also losing that group, and the company’s credit performance is deteriorating later than those of many of its peers, S&P said. “We expect further deterioration in BancorpSouth’s portfolio during the next two to four quarters.”
S&P said it could lower the bank’s ratings if credit deterioration continues at the same or a faster pace, particularly if non-performing assets reach or exceed 5 percent of total loans. If loans stabilize, the outlook may be revised back to stable.
BancorpSouth shares added 43 cents, or 2.4 percent, to $18.59 in afternoon trading.
Tags: Mississippi, New York, North America, Tupelo, United States