Rating Action: Moody's places Webster's ratings (long-term issuer Baa1) on review for downgrade following merger announcementGlobal Credit Research - 20 Apr 2021New York, April 20, 2021 -- Moody's Investors Service, ("Moody's") has placed on review for downgrade all the ratings and assessments of Webster Financial Corporation and Webster Bank, N.A, including its a3 standalone Baseline Credit Assessment (BCA) with the exception of the Prime-1 short-term deposit rating and the Prime-2 short-term counterparty risk rating, which were affirmed.The rating action follows Webster's announcement that it will merge with New York-based Sterling Bancorp in an all-stock transaction. During the review, Moody's will assess the implications of the merger for the existing creditors of Webster, including the associated integration risks from merging two similarly sized institutions with different business profiles.On Review for Downgrade:.. Issuer: Webster Bank N.A..... Adjusted Baseline Credit Assessment, Placed on Review for Downgrade, currently a3.... Baseline Credit Assessment, Placed on Review for Downgrade, currently a3.... Long term Counterparty Risk Assessment, Placed on Review for Downgrade, currently A2(cr).... Short term Counterparty Risk Assessment, Placed on Review for Downgrade, currently P-1(cr).... Long term Counterparty Risk Rating, Placed on Review for Downgrade, currently A3.... Long term Deposit Rating, Placed on Review for Downgrade, currently A1, Outlook changed to Rating Under Review from Stable.... Issuer Rating, Placed on Review for Downgrade, currently Baa1, Outlook changed to Rating Under Review from Stable.. Issuer: Webster Financial Corporation.... Issuer Rating, Placed on Review for Downgrade, currently Baa1, Outlook changed to Rating Under Review from Stable.... Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa1, Outlook changed to Rating Under Review from Stable.... Senior Unsecured Shelf, Placed on Review for Downgrade, currently (P)Baa1.... Subordinate Shelf, Placed on Review for Downgrade, currently (P)Baa1.... Pref. Stock Shelf, Placed on Review for Downgrade, currently (P)Baa2.... Pref. Stock Non-cumulative Shelf, Placed on Review for Downgrade, currently (P)Baa3.... Pref. Stock Non-cumulative, Placed on Review for Downgrade, currently Baa3 (hyb) Affirmations: .. Issuer: Webster Bank N.A. .... Short term Counterparty Risk Rating, Affirmed P-2.... Short term Deposit Rating, Affirmed P-1Outlook Actions:.. Issuer: Webster Bank N.A..... Outlook, Changed To Rating Under Review From Stable.. Issuer: Webster Financial Corporation.... Outlook, Changed To Rating Under Review From StableRATINGS RATIONALEThe initiation of the review on the ratings and assessments for Webster follows the bank's announcement that it will merge with Sterling in an all-stock transaction. The proposed merger will create a Northeast regional bank with assets of approximately $63 billion. Webster's shareholders will own approximately 50.4% of the combined company, and it will operate under the Webster brand. Moody's has placed Webster's ratings on review for downgrade because its proposed merger with Sterling is a large undertaking and Sterling itself is the product of a number of recent acquisitions. In addition to the large operational and integration challenges, Webster's pro forma estimates include sizeable share repurchases in 2022 and management is guiding towards a lower capitalization following the close of the merger.Despite the risks presented by this large merger, Moody's recognizes that the merger will expand Webster's footprint into contiguous New York markets, provide meaningful scale and broaden its deposit base and loan portfolio. However, Moody's noted that Sterling has a sizeable commercial real estate (CRE) concentration estimated at 3.9 times its tangible common equity (TCE) base at 31 December 2020. On a combined basis, Moody's estimates Webster's CRE concentration post acquisition will be 3.1 times its TCE base. Furthermore, until Sterling has been fully integrated, Webster's risk profile will be heightened, particularly as the economic fallout from the coronavirus pandemic is not yet fully known. The review will also evaluate whether the acquisition suggests Webster has a greater risk appetite than previously considered.Moody's review is unlikely to conclude until after the deal has received regulatory approvals and the transaction closes. The banks' management teams anticipate this will occur in the fourth quarter of 2021.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoody's review for downgrade will focus on the risks associated with such a large transaction, including the challenges of integrating two institutions with different business profiles, including operational, particularly IT and cultural fit.Given the direction of the ratings review, rating upgrades are unlikely upon completion of the review. Webster's BCA and ratings could be confirmed upon conclusion of the review if Moody's were to assess that the benefits from the merger would result in a more diversified bank without an increase in risk profile and that the integration risks were adequately mitigated.The principal methodology used in these ratings was Banks Methodology published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Megan Fox Asst. Vice President - Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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