In an Aug. 24 story about Fitch Ratings downgrading credit ratings for South Financial Group Inc., The Associated Press reported erroneously the significance of one of the ratings. Under Fitch's bank individual ratings scale, a 'D' rating is the fourth lowest among six levels, not the lowest. It signifies that a bank has weaknesses, but not that it has defaulted on its obligations.
A corrected version of the story appears below.
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CHICAGO (AP) — Fitch Ratings on Monday cut its issuer default rating for The South Financial Group Inc. and its Carolina First Bank subsidiary further into junk territory, citing continuing credit losses and economic stress in Southern markets.
Shares of South Financial fell 17 cents, or about 8.6 percent, to $1.82 in afternoon trading.
Fitch cut the long-term issuer default ratings for the bank holding company and Carolina First to 'B+' from the previous rating of 'BB+', Fitch's highest non-investment grade rating.
Fitch also cut its individual rating for Greenville, S.C.-based South Financial and Carolina First to 'D' — Fitch's fourth-lowest among six levels on its individual bank rating scale, signifying a bank that has weaknesses — from 'C/D'.
Fitch assigned a "Negative" outlook, signaling a possible further downgrade if conditions worsen.
Fitch said its downgrade "reflects the company's continued high net credit losses, and elevated and increasing level of problem assets."
Many areas within South Financial's geographic base in the South remain under economic stress, Fitch said, noting the company "has been particularly hard hit in its residential construction and development, land, and mortgage portfolios, particularly in Florida and the coastal areas of the Carolinas."
Fitch said it believes loan losses "will remain elevated" this year and into next year.
Fitch noted that South Financial has taken steps to bolster its capital position by issuing stock and selling some assets outside its normal business areas. Although a pending preferred stock exchange could further improve South Financial's position, Fitch said it believes the company will need to raise more money through a common stock offering next year "given Fitch's asset quality outlook."
South Financial had about $12.6 billion in total assets on June 30 and 177 branch offices North Carolina, South Carolina and Florida.
