First Republic Bank’s debt cut to junk by Moody’s
Last updated: 17 March 2023 at 11:02 p.m. ET
First published: 17 March 2023 at 10:26 PM ET
Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank’s financial profile.”
First Republic’s FRC debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.
The downgrade reflects…
Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank̵[ads1]7;s financial profile.”
The First Republic’s
FRC
The debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.
The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces in the medium term in light of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows,” Moody’s analysts said in a news release.
They cited various recent developments with First Republic, including the company’s Thursday disclosure that last week its Federal Reserve loans ranged from $20 billion to $109 billion. Also on Thursday, the bank received a deposit of 30 billion dollars from 11 large American banks.
“Moody’s believes that the high cost of these loans, combined with the high proportion of fixed-income assets in the bank, is likely to have a large negative impact on First Republic’s core profitability in coming quarters,” the analysts said. “Additionally, the rating agency noted that while news of the bank consortium’s deposit is positive in the short term, the long-term path for the bank back to sustained profitability remains uncertain.”
First Republic is reportedly looking to raise money from other banks or private equity firms by selling additional shares, according to the New York Times.
Shares in the company have plunged 80% since the close on March 8, just before Silicon Valley Bank spooked investors with an update on the business and a planned share sale. First Republic lost 33% in Friday’s session despite the deposit arrangement with the major banks. Shares fell another 6% in the extended session on Friday.
Moody’s said the outlook was maintained at “rating under review”. This downgrade rating, it said, “reflects the persistent challenges to the bank’s medium-term credit profile in light of its significantly eroded deposit base, increased reliance on short-term wholesale funding and a significant volume of unrealized losses on its investment securities.”
