Fitch Affirms and Withdraws Webster Financial's 'BBB' IDR

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed and withdrawn the 'BBB/F2' long- and short-term IDRs for Webster Financial Corporation (WBS) and its principal banking subsidiary Webster Bank, NA. The ratings are being withdrawn for commercial reasons. A full list of rating actions follows at the end of this release.

KEY RATINGS DRIVERS - IDRs, VRs, AND SENIOR DEBT

WBS' rating affirmation reflects its solid Connecticut franchise and operating performance and asset quality in line with its rating category. Moreover, WBS has further strengthened its franchise through the third-quarter 2014 (3Q'14) announced acquisition of JP Morgan's health savings account (HSA) business. The HSA business provides a solid source of long-duration deposit funding for the WBS, which will be a benefit to the bank over the long term.

Fitch views WBS' earnings profile as being representative of its rating category. Earnings measures are solid and finished above 2014 the mid-tier median peer level. Earnings are relatively more concentrated in spread revenues than its peers. However, WBS has maintained a more stable net interest margin than its peers.

WBS solid earnings are due in part to relatively stronger operating leverage than its peers. In addition, WBS' earnings profile is also aided by a relatively higher yielding securities portfolio due to a sizeable CMBS portfolio, which has had strong performance. Over 25% of WBS' securities portfolio is invested in higher yielding and relatively riskier, non-government guaranteed securities.

Asset quality is also an attribute that Fitch views representative of WBS' rating category. Although nonperforming assets (NPAs) rank in the top quartile of the mid-tier group at over 2.7%, this number is significantly impacted by WBS' conservative approach to trouble debt restructure (TDR) identification which Fitch includes in its NPA calculation. Over 50% of the bank's nonperforming assets are performing TDRs. As a result, Fitch expects WBS' NPA levels to continue to rank in the top quartile of the mid-tier bank group since TDRs retain their classification for the life of the loan.

Capital levels, although adequate, represent a modest weakness relative to WBS' rating. WBS' tangible common equity ratio was 7.45% at the end of 2014, which ranks in the bottom quartile of the mid-tier bank group.

RATING SENSITIVIES - IDRs, VRs, AND SENIOR DEBT

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - LONG AND SHORT TERM DEPOSIT RATINGS

Webster Bank's uninsured deposit ratings are rated one notch higher than WBS' IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. Fitch believes U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

RATING SENSITIVITIES - LONG AND SHORT TERM DEPOSIT RATINGS

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR

The Support Rating of '5' and Support Ratings Floor of 'NF' reflect Fitch's view that WBS and Webster Bank are not considered systemically important and therefore, the probability of support is unlikely.

RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - HOLDING COMPANY

The IDR and VR of WBS are equalized with those of its chief operating company, Webster Bank, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries.

RATING SENSITIVITIES - HOLDING COMPANY

Rating sensitivities are no longer relevant given today's rating withdrawal.

Fitch has affirmed and withdrawn the following ratings with a Stable Outlook:

Webster Financial Corporation

--Long-term IDR 'BBB';

--Short-term IDR 'F2';

--Senior debt 'BBB';

--Viability Rating 'bbb';

--Preferred stock 'B+';

--Support'5';

--Support Floor 'NF';

Webster Bank, NA

--Long-term IDR 'BBB';

--Short-term IDR 'F2';

--Viability Rating 'bbb';

--Long-term deposits 'BBB+';

--Short-term deposits 'F2';

--Support '5';

--Support Floor 'NF';

WBS DID NOT PARTICIPATE OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE.

Additional information is available on 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (Jan. 31, 2014).

Applicable Criteria and Related Research:

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981299

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Jaymin Berg, CPA
Director
+1 212-908-0368
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Secondary Analyst
Ryan Doyle
Director
+1 212-908-9162
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1 212-908-0771
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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