Concern over the sector had waned after second-quarter results showed most banks stabilized deposit levels following steeper losses during the March regional banking crisis.
"Bank profitability has peaked for the time being," Arsov said.
Shrinking profit margins, along with relatively lower capital levels compared to peers at some regional banks and concern about commercial real estate defaults, were key reasons Moody's reassessed its ratings on banks after earlier actions.
In March, Moody's placed six banks, including First Republic, under review for downgrades and cut its outlook for the industry to negative from stable.
The analyst stressed that the U.S. banking system was still strong overall and that even the banks it cut were rated investment grade, indicating a low risk of default.
Persons:
They've, Banks, Ana Arsov, Arsov, Moody's
Organizations:
Bloomberg, Getty, Silicon Valley Bank, Moody's Investors Service, First Republic, Bank
Locations:
U.S, Silicon