Moody’s cuts SVB Financial

Moody's said it downgraded SVB Financial Group's local-currency senior unsecured and long-term issuer ratings to Baa1 from A3. And the local-currency senior unsecured shelf and local-currency subordinated shelf ratings to (P)Baa1 from (P)A3. The agency also lowered the local-currency preferred stock non-cumulative and local-currency preferred shelf non-cumulative ratings to Baa3 (hyb) from Baa2 (hyb) and (P)Baa3 from (P)Baa2, respectively. The outlook was changed to negative from stable.

The lower ratings reflect the erosion in the company’s funding, liquidity and profitability, which prompted SVB to act to restructure its balance sheet. These balance sheet actions include the sale of $1.75 billion of common equity in addition to mandatorily convertible preferred stock, and sale of investments to shift the balance sheet to an asset sensitive position, Moody’s said.

The revised outlook indicates an upgrade is unlikely. The ratings could be raised if SVB’s profitability returns to historic levels, funding and liquidity without diminishing its capital position, the agency said.

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