In an attempt to save First Republic Bank, a number of mainstream banking giants have decided to come to the bank’s aid with a total deposit of $30 billion.
The shares of San Francisco-based financial services firm, First Republic Bank (NYSE: FRC) are tumbling in today’s Pre-market after the firm got a downgrade from the top credit rating agency, S&P Global Ratings. As reported by CNBC, the embattled bank was downgraded to B+ from BB+ over the weekend after first downgrading it to junk status in the past week.
The woes of First Republic Bank stem from the aftermath of the collapse of Silicon Valley Bank (SVB) which has placed depositors of the firm on the edge per the blurred future of banks with no protection for uninsured deposits. For First Republic Bank, the chances of significant bank runs are there and as such, S&P has kept the company’s shares on its CreditWatch Negative list.
Ratings from agencies like S&P are a major Litmus test for companies and even governments around the world. While the rating firm came about its downgrade per the available data hinged on the company’s performance, surviving the reactions from investors can be the strengthening shield the firm needs to build a whole new growth future.
At the time of writing, the shares of First Republic are down by 18.11% in the pre-market to $18.86 per share. The shares closed Friday’s session at a steeper cut of 32.80% in what appears as an unrelenting attempt on the part of investors to dump the token.
For First Republic Bank, only a drastic measure can save it at this time even though the SPDR S&P Regional Banking ETF showed a positive uptick of 2% at about the same time as the FRC shares slumped to their current state.
In Saving First Republic Bank
In an attempt to save First Republic Bank, a number of mainstream banking giants have decided to come to the bank’s aid with a total deposit of $30 billion. This projected fund will complement the $34 billion the embattled company said it has in its reserve through March 15.
The cash injections from the bigger banks were said to be done in a bid to bolster confidence in US regional banks.
“The deposit infusion from 11 US banks, the company’s disclosure that borrowings from the Fed range from $20 billion to $109 billion and borrowings from the Federal Home Loan Bank (FHLB) increased by $10 billion, and the suspension of its common stock dividend collectively lead us to the view that the bank was likely under high liquidity stress with substantial deposit outflows over the past week,” stated S&P in its note Sunday.
For the First Republic Bank, a more intuitive effort has to be implemented in order to allay customers’ fears that it can handle its house without more intervention. If this can be guaranteed, the bank might have something less to worry about compared to the S&P rating.
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