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Downfall of the First Republic: downgrade of Standard & Poor’s

Downfall of the First Republic: downgrade of Standard & Poor’s

  • S&P downgraded its credit rating to B+ from BB+ on Sunday after first downgrading it to junk status just last week.
  • S&P said the rating remains CreditWatch Negative.
  • First Republic shares have fallen sharply this month as the collapse of the Silicon Valley bank caused investors to rethink other banks with large uninsured deposit bases.

A trader works at the post as shares of First Republic Bank trade on the floor of the New York Stock Exchange (NYSE) in New York City, March 16, 2023.

Brendan McDiarmid | Reuters

Shares of First Republic Bank, which has become a barometer of the regional banking crisis, fell again on Monday after Standard & Poor’s downgraded the San Francisco-based institution’s credit rating.

S&P downgraded its credit rating to B+ from BB+ on Sunday after first downgrading it to junk status just last week. S&P said the rating remains CreditWatch Negative.

The stock fell 15% in pre-market trading Monday, adding to a drop of more than 80% already this month that came as the collapse of a Silicon Valley bank prompted investors to rethink other banks with large uninsured deposit bases.

see chart…

First Republic Bank, 1 day

Despite the First Republic’s decline, S&P Regional Banking’s SPDR index was slightly higher on Monday, up 0.2% in premarket trading.

On Thursday, a group of major banks agreed to deposit $30 billion in First Republic to boost confidence in regional banks. But the bank also suspended the dividend and said it had about $34 billion in cash as of March 15, not counting new deposits.

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The infusion of deposits from 11 US banks, the company’s disclosure that borrowing from the Federal Reserve ranged from $20 billion to $109 billion, loans from the Federal Home Loan Bank (FHLB) increased by $10 billion, and the distribution of common stock dividends stopped collectively. From a point of view, the bank was most likely under high liquidity pressure with large outflows of deposits abroad over the past week.”

UBS bought Credit Suisse over the weekend in a forced deal facilitated by Swiss regulators to prevent the banking crisis from spreading globally. Credit Suisse executives noted that the US regional banking crisis had caused enough instability that the already shaky institution was forced to merge with its competitor.

This is a developing story. Check back for updates.