KBRA Affirms Ratings for F.N.B. Corporation

4 Sep 2024   |   New York

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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.

To access rating and relevant documents, click here.

Methodologies

Disclosures

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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. 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.

Doc ID: 1005724

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