Huntington Bancshares Taking $300M Charge

The ratings agencies did not offer such an optimistic outlook on Friday.

"The writedown will result in a sizable net loss in [the fourth quarter] and, combined with a large quarterly dividend, will result in a material deterioration in Huntington's capital ratios," according to Moody's.

Huntington is also at risk of a further deterioration in the credit quality of its loan portfolio, particularly in its commercial real estate exposures, Moody's says.

"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," according to Moody's.

S&P also cited concerns about Huntington's capital ratios.

"Subjectively, this write-down raises questions as to the thoroughness and effectiveness of the pre-acquisition due diligence, or may signal the combined organization's heightened risk appetite," S&P analysts write in a note. "We will monitor new business strategies, growth, portfolio metrics, and future acquisitions for signs of both."

At least one analyst downgraded Huntington on Friday.

Jeff Davis, an analyst at First Horizon's(FHN) FTN Midwest Securities, cut his rating to neutral from buy.

Sky Financial had "lent to them since 1990. During that time they had no non-performing loans and no credit losses," Davis says. "What is a little surprising is these [Franklin] guys are old hands. They had to know that 2005-2006 was very loose quality [loans]."

"I think where Franklin got hung is they bought these pools and then worked with the borrowers where the hope was [to] over three to five years rehabilitate [the loans], so they could refinance into a more conventional product," he says. "But with the market locked up, we may find that, in addition to vintage 2005-2006 issues, that the borrowers within their mortgage pools couldn't refinance anywhere else."

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