NEW YORK (AP) ¿ Standard & Poor's Ratings Services lowered its ratings on all of Doral Financial Corp.'s preferred shares Friday, after the Puerto Rican bank suspended its dividend payments. S&P cut its ratings by five notches, to "C'' from "CCC." The ratings agency also placed its "B+" long-term counterparty credit rating on Doral on CreditWatch with negative implications. All of the ratings are non-investment grade, or "junk" status. The downgrades follow the company's announcement, included in its annual report filed Friday, that suspended dividend payments on its three outstanding series of non-cumulative preferred stock and its outstanding series of cumulative preferred stock. S&P credit analyst Robert Hansen noted that the company's report also showed that credit quality continued to deteriorate in the fourth quarter, notably within the bank's mortgage portfolio. Fourth-quarter results were hurt by a large, noncash impairment on deferred tax assets and the establishment of a $21.6 million reserve for exposure to Lehman Brothers Inc.
"We believe that the suspension of divided payments on the preferred will reduce the drain on liquidity and capital," S&P said. The positive effects from the dividend could be more than offset by continued credit quality deterioration and further losses. S&P said it will continue to evaluate Doral's loan quality, securities portfolio, capital position, liquidity, operating performance, and various accounting and regulatory issues and expects to resolve the CreditWatch within 90 days. Doral Financial common shares closed Friday's session down 16 cents, or 6.5 percent, at $2.29. The stock has traded between $2.11 and $24.23 in the past 52 weeks, and is down about 67 percent since the start of the year.