NEW YORK (1/13/09)--Standard & Poor’s (S&P) Ratings Services has taken ratings actions on seven corporate credit unions while emphasizing that the corporate credit union industry remains healthy, has a low risk profile and solid liquidity, and exhibits adequate financial profiles. Ratings were lowered for:
* Constitution Corporate FCU, * Corporate Central CU; * Corporate One FCU; * Members United Corporate FCU; * Southeast Corporate FCU; * Southwest Corporate FCU; and * Western Corporate FCU.
In a press release, WesCorp noted that the announcement indicated that its rating action was based “primarily on our re-evaluation of the industry as well as our concern about the potential for material write-downs in WesCorp’s securities portfolio, particularly, but not limited to, its collateralized debt obligation book.” However, S&P did remove WesCorp from negative watch, citing “its strong franchise within the heavily regulated cooperative credit union industry and its adequate financial profile, which is highlighted by good liquidity but low risk-adjusted capital.” WesCorp Senior Vice President/ Chief Financial Officer Jim Hayes said Friday that 100% of the securities in its portfolio at the time of purchase were either government-backed or were rated by both S&P and Moody’s as AAA or AA—the two highest rating categories. The action “not only demonstrates how the market devaluation we’re experiencing is impacting our portfolio, it also points to the trend we see occurring among rating agencies of becoming more conservative in the way they are evaluating the portfolios of all financial institutions,” Hayes said. S&P began its announcement saying its review of corporate credit unions was undertaken in light of its recent lowering of the U.S. Banking Industry Country Risk Assessment. The agency also reported its key rating factors are largely the same as the considerations that drove its recent decision to lower the ratings on 11 major U.S. and European financial institutions. It reported that it is concerned about “the potential for further deterioration in the operating environment, including intensifying pressure on the valuation of mortgage-related structured securities the corporates hold. The rating actions also take account of our increased emphasis on capital and confidence sensitivity as key rating factors. “Overall, we believe the corporate credit union sector/industry remains healthy. These institutions have a comparatively low risk profile, solid liquidi6y and exhibit adequate financial profiles,” S&P said. “A testament to the overall and individual health of the corporates is that despite the unprecedented challenges of the prolonged credit crisis, the rated corporates have been able to hold their structured securities portfolios without compromising their ability to perform their key roles as investment vehicles and liquidity providers to their members.” S&P said that its review of U.S. Central FCU is not completed and will be finished within the next few weeks.