Moody's Investors Service has downgraded the ratings of Milwaukee-based Marshall & Ilsley Corporation (M&I) and its subsidiaries. The downgrade reflects the view of the New York ratings agency that M&I's credit profile has been materially weakened by its large commitment to construction and development financing, a portfolio that grew significantly earlier this decade.

M&I is one of the nation's fifty largest banks, and the largest bank headquarted in Wisconsin.

Moody's lowered M&I from A1 to A3 for senior debt. Lead bank, M&I Marshall & Ilsley Bank, was lowered to C+ from B for bank financial strength and to A2 from Aa3 for long-term deposits. The Prime-1 short-term rating at the bank was affirmed, but the holding company's short-term rating was lowered to Prime-2 from Prime-1. Following the rating action, the outlook on M&I and its subsidiaries is negative. This concludes Moody's review for possible downgrade that began on November 24, 2008.

With the deterioration of residential construction markets, that portfolio has experienced significant stress and M&I was forced to absorb large credit costs in 2008. Moody's believes that will continue in 2009 and that as a result, M&I's near-term earnings potential will be diminished and its capital position will deteriorate. However, M&I's issuance of TARP preferred securities and the near elimination of its common dividend will help it absorb significant losses and remain appropriately capitalized at its new rating level. Nonetheless, the negative outlook considers the possibility that M&I's credit costs will exceed Moody's current expectations.

Notwithstanding the downgrade, Moody's noted that M&I's ratings are supported by its strong direct banking franchise in Wisconsin, its home state, and by its efficient operating platform. Moody's last rating action on M&I was on November 24, 2008 when M&I was placed on review for possible downgrade.