First Republic likely to weather second S&P downgrade within a week: Report
Ryan King
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First Republic Bank is reportedly poised to face another downgrade by S&P Global Inc even after a group of 11 banks scrambled to stabilize it.
Its long-term issuer credit rating is expected to dip from B+ to BB+, sources told Bloomberg. The move comes after First Republic Bank’s rating was bumped down from A- last week by the S&P amid growing concerns over the bank. Public disclosure of the second downgrade could come Sunday, per the report.
$30 BILLION RESCUE OF FIRST REPUBLIC BANK ANNOUNCED BY MAJOR BANKS
Last week, a bevy of banks, including Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist Bank, and U.S. Bank, announced plans to inject about $30 billion into the faltering First Republic.
Federal officials helped coordinate the effort after nearly 71% of the bank’s value evaporated last week. Treasury Secretary Janet Yellen has insisted that the state of the financial system “remains sound and that Americans can feel confident that their deposits will be there when they need them.”
First Republic, the 14th-largest bank in the country, was formed in 1985 and focuses on private banking and wealth management. Much of its woes appeared to stem from parallels that investors saw between it and Silicon Valley Bank, which was taken over by federal regulators on March 10.
Nearly two-thirds of First Republic’s deposits were uninsured, per CNN. The Federal Deposit Insurance Corporation insures deposits of up to $250,000, though the government assured depositors in SVB that they would have access to money amid its collapse.
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“Is there such a thing as a comeback from two downgrades in one week? $FRC to be downgraded @SPGlobalRatings days after firm cut lender to junk. S&P’s move to lower First Republic’s long-term issuer credit rating to B+ from BB+ could be disclosed as early as Sunday,” Quill Intelligence CEO Danielle DiMartino Booth tweeted.
https://twitter.com/DiMartinoBooth/status/1637536161819230208
Market uncertainty from the SVB collapse has seemingly reverberated to other banks as well, such as Swiss lender Credit Suisse, further exacerbating its preexisting problems. The Washington Examiner contacted an S&P representative for comment.