Shares of First Republic Bank tanked by over 17% in premarket trading Monday morning amid news that S&P Global Inc issued its second credit downgrade for the embattled bank within a week.
Monday’s plunge caps off an over 80% decline within the past month after the collapse of Silicon Valley Bank spooked investors and caused panic in the banking sector. Futures for stocks overall were down to start Monday, with Dow Jones Industrial Average futures down roughly 0.17%, S&P 500 futures 0.15%, and Nasdaq-100 futures 0.15% by around 8 a.m.
FIRST REPUBLIC LIKELY TO WEATHER SECOND S&P DOWNGRADE WITHIN A WEEK: REPORT
On Sunday, the S&P downgraded First Republic Bank’s credit rating to B+ from BB+, despite a $30 billion infusion from 11 banks announced last week.
Shares of the bank were hovering near $128.89 a share a month ago but have plunged to about $23. The ratings downgrade from the S&P came after it already bumped First Republic Bank’s rating down from an A- last week.
“The deposit infusion from 11 U.S. 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,” the S&P said Sunday.
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 the $30 billion injection for First Republic Bank last week.
Federal officials help bring on the injection after the company’s shares evaporated 71% last week. First Republic, the 14th-largest bank in the country, was established in 1985.
Roughly two-thirds of First Republic’s deposits were uninsured, per CNN. Under the Federal Deposit Insurance Corporation policy, deposits of up to $250,000 are insured. Notably, the government reassured SVB depositors they would have access to their money, despite going over that figure. However it is unknown if the FDIC would extend that to First Republic’s deposits.
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Further tumult affecting markets is the problems afflicting Swiss bank Credit Suisse. UBS Financial Services announced plans Sunday to purchase the bank for the equivalent of $3.2 billion.
Despite the market frenzy, Treasury Secretary Janet Yellen has sought to ease panic, maintaining that the financial system “remains sound, and that Americans can feel confident that their deposits will be there when they need them.”
