Commerce Bancshares Inc.

The stable outlook on Commerce Bancshares Inc. reflects S&P Global Ratings' expectation that we are unlikely to change the rating over the next two years since we expect financial performance to remain stable as the ongoing U.S. economic recovery should reduce risk of credit losses. Although net charge-offs could increase as government stimulus efforts recede, the bank's conservative underwriting standards should result in lower loan losses than peers. In addition, we expect earnings to remain stable, despite low interest rates, due to Commerce's large proportion of noninterest income. We could lower the ratings if Commerce's credit quality metrics worsen substantially more than we anticipate, or if we see more aggressive lending policies, such as a material increase in the bank's

...Our ratings on Commerce Bancshares Inc. reflect our expectation that it will maintain its consistent performance, solid revenue diversification, and conservative financial policies. We expect Commerce to grow its primary businesses (commercial, consumer, and wealth management) organically at a modest pace while continuing to prudently expand into other geographies outside of its core Midwestern footprint. Commerce's diversified revenue and high proportion of noninterest income have contributed to the company's stable earnings performance. We expect Commerce's capital levels and funding profile to remain better than many regional bank peers. Capital levels continue to exceed many peers despite the company redeeming all of its preferred stock in 2020. Furthermore, Commerce's funding profile has among the lowest cost of funds for U.S. rated banks at 4 basis points (bps) due to its ample low-cost deposits and significant proportion of non-interest bearing deposits. Commerce's asset quality...

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