WATERBURY, Conn. – Webster Financial Corp. (NYSE: WBS) is one of 18 national and regional banks that had their credit ratings cut by Standard & Poor’s last week as concerns remained about continued turmoil in the financial sector.

S&P said the cuts came in part because it expected bad loans to rise and because the industry is likely to face tighter government regulation.

“We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions,” said S&P credit analyst Rodrigo Quintanilla in a press release. “Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality. Such a transition period justifies lower rating as industry players implement changes.”

Some of the larger banks that experienced a rating cut by S&P included Capital One Financial Corp., Wells Fargo & Co., BB&T Corp. and Regions Financial Corp.

S&P lowered the Webster Financial rating from BBB to BBB-, and cut Webster subsidiary Webster Bank N.A. from BBB+/A-2 to BBB/A-2. The agency also gave a negative outlook for both companies.

Webster operates 10 branches in Rhode Island and ranks ninth in Rhode Island in terms of deposits.

“The downgrade reflects Webster Financial Corp.'s asset-quality deterioration to date and our expectation that non-performing assets will continue to rise in the severe recession,” S&P said in its report. “Asset-quality deterioration may cause additional pressures on Webster’s below-average profitability and tangible common capital levels, in our view.”

A Webster spokesman told the Waterbury Republican-American in Connecticut that the downgrade “reflects the impact of the recession on the banking industry.”

“This action by S&P puts Webster's rating where it was in January 2006,” the newspaper quoted Edward P. Steadham as saying. “Webster remains investment grade and the one-notch downgrade compares favorably with the average downgrade of two notches recorded among this group of banks since 2007.”

Last month, S&P Ratings Services placed 22 banks, including Webster, on “CreditWatch” based on capitalization levels and expected level of losses in the next two years.

Webster Financial Corp. (NYSE: WBS) – a $17.1 billion company based in Waterbury, Conn. – is the holding company for Webster Bank N.A., a financial services company with more than 180 branches, including 10 branches in Rhode Island. Additional information is available at www.WebsterOnline.com.