SVB collapse: First Republic Bank’s rating slashed to junk status
Zachary Halaschak
Video Embed
First Republic Bank is hemorrhaging value after Standard and Poors cut its rating to junk status on Wednesday amid broader fears about the banking sector in the wake of the collapse of Silicon Valley Bank.
The credit rating agency moved the San Francisco-based bank’s long-term issuer credit rating to BB+ from A-. The group said that the bank has a higher risk of depositors pulling out their money, even after the government action this week to stop a run on the banks.
DOW JONES FUTURES FALL 600 POINTS FOLLOWING INTERNATIONAL BANK SHARES’ SHARP DECLINE
“We believe that First Republic’s deposit base is more concentrated than most large U.S. regional banks, which presents heightened funding risks in the current environment,” S&P said.
The bank is just one of many regional banks that have fallen victim to uncertainty and declining stock prices following the collapse of Silicon Valley Bank. After a turbulent week, First Republic’s stock was falling fast on Wednesday morning against the backdrop of the credit downgrade.
Shares of the bank were down about 15% within an hour of the opening bell as investors fled the stock, fearing that First Bank, too, could fall victim to SVB’s fate.
Switzerland-based megabank Credit Suisse also was tanking on Wednesday. That is because the chairman of Saudi National Bank, the bank’s biggest shareholder, announced it would not be increasing its stake, given regulatory constraints.
Credit Suisse’s stock fell more than 24% amid the fracas.
Credit Suisse Chairman said Axel Lehmann on Wednesday that government assistance “isn’t a topic.”
“We have strong capital ratios, a strong balance sheet,” Lehmann said. “We already took the medicine,” he said, in reference to restructuring.
The turbulence on Wall Street comes after stocks finished up on Tuesday, and investors appeared to be calming down following the failures of SVB and crypto lender Signature Bank.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
One indicator that fear was returning again was captured by the Chicago Board Options Exchange Volatility Index, better known as VIX but also as the “fear index.”
The VIX was up nearly 14% on Wednesday morning, showing more anxiety in the market.