KBRA Affirms Ratings for Wesbanco, Inc.

10 Aug 2023   |   New York


KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, the preferred shares shares rating of BBB-, and the short-term debt rating of K2 for Wheeling, West Virginia-based Wesbanco, Inc. (NASDAQ: WSBC) (“Wesbanco” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for the bank subsidiary, WesBanco Bank, Inc. The Outlook for all long-term ratings is revised to Stable from Positive.

Key Credit Considerations

The change in Outlook to Stable, in part, reflects WSBC’s core regulatory capital ratios that have trended downward to be more consistent with those of the rated peer group as well as the economic uncertainty in the current interest rate environment. In addition, the company has transitioned its CEO position on August 1, 2023 with the retirement of long tenured CEO Todd Clossin, who has successfully led WSBC for the last ten years, creating some possible degree of variation in strategy going forward under the new leadership of Jeff Jackson, who joined WSBC as COO in August 2022. Supporting the company’s ratings are WSBC’s solid funding base reflecting favorable characteristics in terms of both composition and cost. The branch-based deposit gathering platform is comprised of granular deposits with an above peer proportion of noninterest bearing deposits, at 33% of total deposits as of 2Q23, and a well below peer average cost of total deposits of 1.03% at 2Q23. WSBC’s primary and secondary liquidity capacities also covered its uninsured deposits by 1.2x as of 2Q23. The company’s credit profile reflects its conservatively underwritten loan portfolio and a granular loan composition with a low historical rate of credit losses. KBRA views WSBC’s LLR of 1.08% of total loans (LLR/NPA coverage is 3.6x as of 2Q23), coupled with 0.14% unaccreted purchase accounting marks, as solid, further reinforcing the company’s loss absorption capacity beyond the core capital levels. WSBC has maintained solid overall core and regulatory capital, ratios of which have declined more recently with strong loan growth and limited share buybacks, with CET1 at 11.0% and total capital of 14.8% as of 2Q23. KBRA expects the company to maintain strong capital levels, enhanced by its earnings profile and capital generating capabilities going forward.

Rating Sensitivities

A rating upgrade is not likely over the medium-term. However, if WSBC generates stable-to-improving earnings and capital levels consistent with higher rated peers while maintaining healthy credit trends, positive rating actions are possible over a longer time horizon. Conversely, a rating downgrade is not expected, although the Outlook could be revised to Negative if there is material deterioration in earnings or credit quality or an unexpected reduction in capital ratios more consistent with lower rated peers.

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