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PNC » Topics » Status of Credit Ratings

This excerpt taken from the PNC 10-Q filed May 11, 2009.

Status of Credit Ratings

The cost and availability of short- and long-term funding, as well as collateral requirements for certain derivative instruments, is influenced by debt ratings. A decrease, or potential decrease, in credit ratings could impact access to the capital markets and/or increase the cost of debt, and thereby adversely affect liquidity and financial condition.

On May 5, 2009, Standard and Poor’s placed PNC on “CreditWatch Negative” as part of an ongoing industrywide review the agency is conducting on the financial services sector. S&P is concerned about increasing credit quality deterioration and declining earnings across the industry and the impact that may have on the capital positions of financial firms.

 

In March 2009, Moody’s placed the Bank Financial Strength Ratings (BFSR) of PNC under review for possible downgrade. However, the deposit and debt ratings were affirmed with a negative outlook. These actions reflected Moody’s view that the current housing and economic crisis will lead to significantly higher credit losses than previously anticipated.

In February 2009, S&P lowered its ratings on certain preferred and hybrid capital issues of PNC and its banking subsidiaries by one rating level.

In January 2009, S&P lowered its long-term counterparty credit rating on PNC to A from A+ and affirmed the short-term counterparty credit rating of A-1. They also lowered the counterparty credit ratings on PNC’s banking units to A+/A-1 from AA/A-1. At the same time, S&P raised the counterparty credit ratings on the banking units of National City to align with those of PNC’s banking subsidiaries. These actions were in response to PNC’s acquisition of National City and S&P’s concerns regarding the size of the transaction, exposure to residential real estate in the Midwest and Florida, and the significant challenges of the current economic environment.

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