NEW YORK (AP) ¿ Moody's Investors Service late Tuesday downgraded the ratings of BB&T Corp. due to concern about the regional bank's significant exposure to weakening commercial and residential real estate loans.
Moody's cut the holding company's long-term ratings by one notch to "A1" from "Aa3," and the bank financial strength rating of its operating bank and thrift to "B'' from "B+."
The long-term debt and deposit ratings of the lead bank and its smaller thrift were affirmed at "Aa2." The outlook on the investment-grade ratings is negative.
The ratings action was a result of Moody's belief that the bank's real estate portfolio will continue to come under pressure as the housing market and the broader economy remain weak.
Moody's expects BB&T to cut its dividend if credit deteriorates further. But even if the bank reduces its dividend, rising credit costs could hurt BB&T's capital position this year, the ratings service said.
Still, Moody's said the bank is strong enough to absorb several billion dollars of additional credit costs over a 12 to 18 month period without further negative rating pressure.
On Friday, the Winston-Salem, N.C.-based bank posted a 37 percent drop in first-quarter profit, as loans that were overdue or written off as unpaid surged and the bank set aside more money to cover souring credit. But the results beat Wall Street's expectations.