Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB+, a subordinated debt rating of BBB, a preferred stock rating of BBB-, and a short-term debt rating of K2 to Wheeling, West Virginia-based Wesbanco, Inc. (NASDAQ: WSBC) ("the company"). In addition, KBRA assigns deposit and senior unsecured debt ratings of A-, a subordinated debt rating of BBB+, and short-term deposit and debt ratings of K2 to Wesbanco Bank, Inc. the lead subsidiary. The Outlook for all long-term ratings is Stable.
The ratings are supported by WSBC’s experienced management team, conservative loan underwriting, and the company’s strong deposit franchise with solid market share positions in West Virginia, and key MSAs in KY, MD, and OH resulting in a low-cost core deposit base (20 bps in 2Q 2020). In view of the coronavirus-related economic impact, KBRA expects profitability of WSBC and other banks to be affected by higher loan loss provisions. KBRA believes WSBC will be relatively resilient given conservative risk management and underwriting. WSBC’s solid pre-COVID performance (core ROAA 1.30%-1.40% range in recent years) with stable noninterest income revenue exposure driven by complimentary services and stable NIM consistently ranging in the mid-to-upper 3% range also supports the ratings. While the company has grown through M&A, it has maintained conservative core capital levels with TCE just below 10% and CET1 at 12.6% as of 2Q 2020, and we expect the company to continue to manage capital in this manner. NPAs have been stable at slightly above peer levels, which is partially due to the level of loans acquired via M&A. Importantly, the company has had just 88 bps of cumulative NCOs since 2015. WSBC also has 0.43% of total loans (~$48 million) available as a credit mark to further absorb future credit losses along with 2.3x LLR/NPL coverage as of 2Q 2020. Exposure to COVID-19 Phase 1 industries is in line with peer levels at 16.7% of total loans excluding PPP, or 107% RBC, and the company has deferred 17% of its loan portfolio (excluding PPP) as of July 20, 2020. The largest industry exposure is retail at 8.2% of loans.
KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking and other sectors. Please refer to our publication U.S. Bank 1Q 2020 Ratings Compendium for our latest thoughts.
The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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