Moody's reviews Axos for downgrade

Moody's Investors Service said it placed the long-term ratings and assessments of Axos Financial, Inc., including the Baa3 local-currency subordinate regular/bond debenture rating, on review for downgrade.

“The review for downgrade reflects Moody's view that Axos' evolving business strategy adds additional credit, operational and governance risks to its overall credit profile through both its securities and clearing businesses and its new and planned initiatives in digital asset banking. While Axos has long had a technology-focused business model that aims to position itself for the future of banking, its foray into products and services in securities, clearing and digital assets adds complexity and may increase its funding and operational risk profile,” Moody’s said in a press release. The review will consider the firm's governance and risk management of these business areas.

Additionally, the agency said it will look at Axos Clearing's liquidity stress testing and contingency funding and liquidity planning and Axos' risk management policies and procedures in its new digital asset initiatives.

“The review will also consider the bank's capitalization, which has declined, and its commercial real estate (CRE) portfolio, which both has increased and also contains a sizeable exposure to construction,” the agency added.

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