MW First Republic Bank downgraded by Moody


Moody’s states that First Republic faces “significant challenges,”  and its stock ended Friday trading more than 30% lower.

Moody’s Investors Service lowered First Republic Bank’s credit rating to “junk” on Friday night. They did this because “the bank’s financial profile” was getting worse.

Moody’s lowered First Republic’s (FRC) debt rating from Baa1 to B2. This week, Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt.

Moody’s analysts stated in a press release that the downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term as a result of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows.”

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They talked about a few recent things that happened with First Republic, like how the company said on Thursday that it had borrowed anywhere from $20 billion to $109 billion from the Federal Reserve the week before.Also on Thursday, the bank received $30 billion in deposits from 11 major U.S. financial institutions.

Analysts said, “Moody’s thinks that the high cost of these borrowings and the bank’s high proportion of fixed-rate assets will have a big effect on First Republic’s core profitability in the coming quarters.””Also, the rating agency said that even though the news about the banking consortium’s deposits is good in the short term, the bank’s long-term path back to sustained profitability is still unclear.”

The New York Times reports that First Republic is attempting to raise capital from other banks or private-equity firms by selling additional shares.

The company’s stock has fallen 80% since the market’s close on March 8, just before Silicon Valley Bank’s business update and planned stock sale alarmed investors. Even though there was an agreement with the big banks about deposits, First Republic lost 33% on Friday.Friday’s extended session saw additional declines of 6% in the stock market.

Moody’s stated that the outlook remained “rating under review.” This review for a downgrade, it was stated, “reflects the ongoing challenges to the bank’s medium-term credit profile in light of its significantly eroded deposit base, increased reliance on short-term wholesale funding, and substantial volume of unrealized losses on its investment securities.”

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