KBRA Affirms Ratings for F.N.B. Corporation

KBRA affirms the senior unsecured debt rating of A-, the subordinated debt rating of BBB+, and the short-term debt rating of K2 for Pittsburgh, PA-based F.N.B. Corporation (NYSE: FNB) (“the company”). KBRA also affirms the deposit and senior unsecured debt ratings of A, the subordinated debt rating of A-, and the short-term deposit and debt ratings of K1 for the lead subsidiary, First National Bank of Pennsylvania. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are reflective of KBRA’s view towards FNB’s experienced and stable executive leadership and its consistent approach to management of the company’s balance sheet and risk as reflected in its stable earnings and credit risk performance. Despite the rather turbulent operating environment over the past couple of years, FNB has sustained its solid earnings profile, with an ROAA tracking between 1.0% - 1.1% since 2021, in part due to its rather diversified mix of noninterest income (which has tracked near 0.7% of average assets), as well as low credit costs (<0.2% of average assets) and below-average operating expenses (~2.0% of average assets). The ratings are further supported by FNB’s funding profile which includes a broad retail branch footprint complemented by its competitive online and digital banking services, that has provided the company with a durable, lower-cost deposit base (2.08% total cost of deposits in 2Q24). Moreover, FNB has demonstrated an ability to consistently grow core deposits at a pace sufficient to support its manageable loan growth targets.

While FNB runs with a more “loaned-up” balance sheet with average loans representing ~80% of average earning assets at 2Q24, the company has historically reported a below-average NIM, in part, due to its lower risk profile as reflected by its lower average loan yield (5.92% for 2Q24). FNB has a solid, long term track record with regard to credit performance, maintaining an NCO ratio below 0.3% since 2012 (FNB’s NCO ratio peaked at 1.0% in 2009 during the GFC). Moreover, FNB’s focus on maintaining a well-diversified loan mix was reflected in its more moderate concentration in investor CRE ( ~200% of risk-based capital at 2Q24). Additionally, the company has managed its capital rather consistently, with a CET1 ratio tracking at or above 10% in recent quarters. While capital ratios have generally trended below peer averages, FNB’s capital position is viewed as suitable considering the company’s lower-risk profile and long-term performance.

Rating Sensitivities

The Stable Outlook reflects KBRA's view that a rating change is unlikely over the medium term. However, should FNB meaningfully enhance its earnings profile, including a more diversified revenue mix as well as managing to above-peer capital ratios, positive rating momentum could occur over time. Conversely, the material degradation of the loan book with FNB experiencing comparatively elevated credit losses over multiple quarters, impacting the profitability of the company or a measurable shift in the funding profile of the company could result in negative rating action.

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Methodologies