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Fitch Affirms UMB Financial Corporation's L-T IDR at 'A+' Following Mid-Tier Regional Peer Review

  Fitch Affirms UMB Financial Corporation's L-T IDR at 'A+' Following Mid-Tier
  Regional Peer Review

Business Wire

CHICAGO -- February 14, 2013

Fitch Ratings has affirmed the long-term Issuer Default Ratings (IDRs) of UMB
Financial Corporation (UMB) and its lead subsidiary, UMB Bank, National
Association at 'A+'. Fitch has also downgraded the short-term IDR to 'F1' from
'F1+'. The Rating Outlook is Stable. A complete list of ratings follows at the
end of this release.

Fitch reviewed UMB as part of a peer review that included 16 mid-tier regional
banks. The banks included in the peer review include: Associated Banc-Corp.,
Bank of Hawaii Corporation, BOK Financial Corporation, Cathay General Bancorp,
Cullen/Frost Bankers, Inc., East West Bancorp, Inc., First Horizon National
Corporation, First National of Nebraska, Inc., First Niagara Financial Group,
Inc., Fulton Financial Corporation, Hancock Holding Company, People's United
Financial, Inc., Synovus Financial Corp., TCF Financial Corporation, UMB
Financial Corp., Webster Financial Corporation. Refer to the release titled
'Fitch Takes Rating Actions on Its Mid-Tier Regional Bank Group Following
Industry Peer Review' for a discussion of rating actions taken on the entire
mid-tier regional bank group.

The mid-tier regional group is comprised of banks with total assets ranging
from $10 billion to $36 billion. Issuer Default Ratings for this group is
relatively dispersed with a low of 'BB-' and a high of 'A+'. Mid-tier regional
banks typically lag their large regional bank counterparts by asset size,
geographic footprint and product/revenue diversification. As such mid-tier
regional banks are more susceptible to idiosyncratic risks such as geographic
or single name concentrations.

Fitch's mid-tier regional bank group has fairly homogenous business
strategies. The institutions are mostly reliant on spread income from loans
and investments. With limited opportunity to improve fee-based income in the
near term, Fitch expects that mid-tier banks will continue to face greater
earnings headwinds in 2013 than larger institutions with greater revenue
diversification.

Share repurchases is common theme amongst the mid-tier banks. As mid-tier
banks face earnings headwinds, institutions have begun repurchasing common
shares to improve shareholder returns. Fitch anticipates continued repurchase
activity in 2013 as the return on equity lags historical norms for the group.

In addition to share repurchases, Fitch has observed that some mid-tier banks
have looked to their investment portfolio to improve returns. Most notably,
CLOs and CMBS have become more popular amongst mid-tier banks. Although such
securities are beneficial to yields and returns, Fitch notes that such
purchases can be a negative ratings driver if the risks are not properly
measured, monitored and controlled.

Asset quality continues to improve throughout the banking sector. Both
nonperforming assets (NPAs) and net charge-offs (NCOs) are down significantly
year over year. Fitch anticipates further asset quality improvement as
nonperforming loan (NPL) inflow slows. Reserve levels have also declined as
asset quality improves, which has been beneficial to earnings in 2012. Fitch
expects further reserve releases in 2013 but at a slower pace.

RATING ACTION AND RATIONALE

Today's action reflects UMB's long history of conservative management and
oversight by the Kemper family, which has guided the company successfully
through multiple business cycles over the last several years, consistently
delivering solid operating performance and maintaining good credit quality,
which Fitch expects will continue. Fitch anticipates the company will maintain
its strong operating results over an intermediate to long-term horizon.

UMB's operating performance, as measured through return on assets (ROA),
continues to be above other mid-tier peers. Average 5Q ROA was 92 basis points
(bps) compared to 77bps for the mid-tier peer group. Driving this stable
performance is a low cost deposit base, low credit costs, and a sizable
contribution from non-interest income. Although not as robust as some
institutions, it is remarkable given the low risk nature of the company's
balance sheet. Fitch also notes that UMB's bottom line has been supported by
gain on sale of securities, which Fitch anticipates will be more limited in
nature when interest rates rise. On average, securities gains have accounted
for 6% of non-interest income.

UMB continues to maintain an extremely cheap deposit base, with approximately
40% of the company's total deposits being attractive non-interest bearing
demand deposits. UMB's average cost of deposits was 26bps compared to peers
that average around 50-60bps. This advantage has recently allowed UMB to win
market share and drive solid loan growth of 10% from the fourth quarter of
2011 (4Q'11) to 4Q'12. The yields from these new loans should help to buffer
the decline that lower rates are having on the company's net interest margin
(NIM).

Fitch's rating action also incorporates UMB's maintenance of strong credit
quality over the last several years, including during the recent financial
crisis. NPAs as a percentage of gross loans plus other real estate owned
impressively hovered around 60bps over the last five years and well below most
mid-tier peer institutions. This has meant that the company's provision
expense has remained low, which has further helped keep operating performance
strong.

Fitch's downgrade of UMB's short-term IDR to 'F1' from 'F1+' reflects the more
typical alignment of the short-term IDR to the long-term IDR. Fitch continues
to regard UMB's conservative funding and liquidity profile to be key rating
strengths, and today's action should be viewed as a realignment of the
short-term IDR.

RATING DRIVERS AND SENSITIVITIES- VRs and IDRs:

Fitch notes that UMB's ratings are at the top of their potential ratings
range, and thus there is very limited upside to current ratings. Ratings could
be negatively impacted, on the other hand, by a significant change in
ownership structure or management that limited the involvement of Kemper
family in the company's daily operations. Other negative impacts could come
from a material change in the loan portfolio or other exogenous impacts that
could hurt the company's business.

RATING DRIVERS AND SENSITIVITIES - Support Ratings and Support Floor Ratings:

All of the mid-tier regional banks in the peer group have Support Ratings of
'5' and Support Floor Ratings of 'NF'. In Fitch's view, the mid-tier banks are
not considered systemically important and therefore, Fitch believes the
probability of support is unlikely. IDRs and VRs do not incorporate any
government support for any of the banks in the mid-tier regional bank peer
group.

RATING DRIVERS AND SENSITIVITIES - Subordinated Debt and Other Hybrid
Securities:

Subordinated debt and hybrid capital instruments issued by the banks are
notched down from the issuers' VRs in accordance with Fitch's assessment of
each instrument's respective non-performance and relative loss severity risk
profiles, which vary considerably. The ratings of subordinated debt and hybrid
securities are sensitive to any change in the banks' VRs or to changes in the
banks' propensity to make coupon payments that are permitted but not
compulsory under the instruments' documentation.

RATING DRIVERS AND SENSITIVITIES - Holding Company:

All of the entities reviewed in the mid-tier regional bank group have a bank
holding company structure with the bank as the main subsidiary. All
subsidiaries are considered core to parent holding company supporting
equalized ratings between bank subsidiaries and bank holding companies. IDRs
and VRs are equalized with those of its operating companies and banks
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 DRIVERS AND SENSITIVITIES - Subsidiary and Affiliated Company Rating:

All of the entities reviewed in the mid-tier regional bank group factor in a
high probability of support from parent institutions to its subsidiaries. This
reflects the fact that performing parent banks have very rarely allowed
subsidiaries to default. It also considers the high level of integration,
brand, management, financial and reputational incentives to avoid subsidiary
defaults.

Fitch has taken the following rating actions:

UMB Financial Corporation

--Long-term IDR affirmed at 'A+';

--Short-term IDR downgraded to 'F1' from 'F1+';

--Viability affirmed at 'a+'

--Support affirmed at '5';

--Support Floor affirmed at 'NF'.

UMB Bank, National Association

--Long-term deposits affirmed at 'AA-';

--Short-term deposits affirmed at 'F1+';

--Long-term IDR affirmed at 'A+';

--Short-term IDR affirmed at 'F1+';

--Viability affirmed at 'a+'

--Support affirmed at '5';

--Support Floor affirmed at 'NF'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

In addition to the source(s) of information identified in Fitch's Master
Criteria, these actions were additionally informed by information provided by
the companies.

Applicable Criteria and Related Research:

--'Risk Radar' (Jan. 16, 2013);

--'U.S. Banks: Rationalizing the Branch Network (Witness the Incredible
Shrinking Branch Network)' (Sept. 17, 2012);

--'U.S. Banks: Mortgage Representations and Warranties (Banks Increase
Reserves; Uncertainty Remains)' (Aug. 20, 2012)

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

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

--'Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)'
(Aug. 7, 2012);

--'Basel III: Return and Deleveraging Pressures' (May 17, 2012);

--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05,
2012).

Applicable Criteria and Related Research:

Risk Radar Update

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=699014

U.S. Banks: Rationalizing the Branch Network (Witness the Incredible Shrinking
Branch Network)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688330

U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves;
Uncertainty Remains)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684038

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

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

Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685638

Basel III: Return and Deleveraging Pressures

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678273

Assessing and Rating Bank Subordinated and Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542

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.

Contact:

Fitch Ratings
Primary Analyst
Sarim Khan, +1-312-368-5459
Associate Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Justin Fuller, +1-312-268-2057
Director
or
Committee Chairperson
Joo-Yung Lee, +1-212-908-0560
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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