First Republic falls: S&P credit rating downgrade
- S&P cut its credit rating to B+ from BB+ on Sunday after first lowering it to junk status just last week.
- The rating remains at CreditWatch Negative, S&P said.
- First Republic shares are down sharply this month as the collapse of Silicon Valley Bank prompted investors to reconsider other banks with large uninsured deposit bases.
A trader works at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, March 16, 2023.
Brendan McDermid | Reuters
Shares of First Republic Bank, which has become the barometer of the regional banking crisis, fell once again on Monday after Standard & Poor’s cut the San Francisco-based institution’s credit rating.
S&P cut its credit rating to B+ from BB+ on Sunday after first lowering it to junk status just last week. The rating remains at CreditWatch Negative, S&P said.
The stock fell 15% in premarket trading on Monday, adding to a more than 80% decline already this month that came as the collapse of Silicon Valley Bank prompted investors to reconsider other banks with large uninsured deposit bases.
First Republic Bank, 1 day
Despite First Republic’s decline, the SPDR S&P Regional Banking ETF was slightly higher Monday, up 0.2% in premarket trading.
On Thursday, a group of major banks agreed to inject $30 billion into First Republic to bolster confidence in regional banks. But the bank also suspended dividends and said it had about $34 billion in cash as of March 15, not including the new deposits.
“The deposit infusion from 11 US banks, the company’s disclosure that loans from the Fed range from $20 billion to $109 billion and loans from the Federal Home Loan Bank (FHLB) increased by $10 billion, and the suspension of its common stock dividend collectively led us to the view that the bank was likely under high liquidity stress with significant deposit outflows in the past week,” S&P said in its note on Sunday.
UBS bought Credit Suisse at the weekend in a forced tie-up arranged by Swiss regulators to stop the banking crisis from spreading globally. Credit Suisse executives noted that the US regional banking crisis caused enough instability to force the already shaky institution to merge with its rival.
This is a developing story. Check back for updates.