On December 24, 2024, Fitch Ratings assigned Banc of California, Inc. (BANC) Long- and Short-Term Issuer Default Ratings (IDRs) of 'BBB-' and 'F3', respectively, with a Stable Outlook. Fitch also affirmed Banc of California's (BofC) Long- and Short-Term IDRs at 'BBB-' and 'F3'. This rating reflects the bank's progress in simplifying operations and repositioning its balance sheet following the merger with PacWest Bancorp.
In addition to the IDRs, Fitch assigned a viability rating of 'bbb-', a senior unsecured rating of 'BBB-', a subordinated rating of 'BB+', and a preferred rating of 'B+' to BANC. The Stable Outlook indicates Fitch's expectation that the bank's financial profile will remain consistent with these ratings over the medium term.
Fitch noted that BANC's risk profile is commensurate with its rating, with risks effectively monitored and managed. The bank's exposure to commercial real estate (CRE) was 284% of risk-based capital at Q3 2024, which is higher than peers, but exposure to office properties is contained at 3.8% of total loans. The bank has built robust reserves against potential losses in the portfolio.
The ratings agency upgraded BANC's earnings and profitability score to 'bbb-' from 'bb+', citing significant strides in offloading lower-yielding assets and reducing $12 billion of wholesale funding. These actions, combined with achieved expense targets, are expected to align profitability with peers in 2025. Capital levels, with a CET1 ratio of 10.46% at Q3 2024, are viewed as adequate.
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