FRC - First Republic Bank stock extends slump as S&P downgrades again

2023-03-20 06:11:16 ET

First Republic Bank ( NYSE: FRC ) is starting off this week -14% pre-market following a downgrade by S&P citing "substantial long-term challenges for the business."

S&P lowered its long-term issuer credit rating on the bank to 'B+' from 'BB+' while also cutting its senior unsecured issue rating to 'B+', subordinated issue rating to 'B-' and preferred stock issue rating to 'CCC'.

The ratings agency noted that despite support from major US banks, it may not be enough to stem the long-term liquidity and profitability challenges for First Republic ( FRC ).

The nation's largest banks - including JPMorgan ( JPM ), Bank of America ( BAC ), Citi ( C ) and Wells Fargo ( WFC ) - agreed last week to deposit about $30 billion with the troubled lender .

However, S&P said it "does not view this deposit infusion as a longer-term solution to the bank's funding issues. In addition, we think attracting meaningful deposits will be difficult, constraining the bank's business position."

The agency said it could lower its ratings on First Republic ( FRC ) further if the bank is not able to make progress in recovering some of the lost deposits or continues to see deposit outflows, or if its debt balances remain elevated to the point of sustained negative earnings.

Moody's Investors Service also downgraded all long-term ratings and assessments of First Republic ( FRC ) on Sunday and warned of further possible cuts as the bank faces pressures of deposit outflows and higher-cost funding as the value of its assets decline.

Last week, FRC also received a Junk rating at S&P and Fitch  on outflow risk

The bank has dropped around 14% in the past week, and 33% on Friday alone.

More on the bank crisis:

First Republic Bank: 4 Reasons To Buy

As Banking Stocks Tumble, I Turn To Bank Of America And Toronto-Dominion

Goldman expected to make $100M from buying SVB assets last week

Bank of America: Brace For Impact

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