First Republic Bank Debt Is Shredded to Garbage by Moody’s

Moody’s Investors Service downgraded First Republic Bank’s credit rating to junk late Friday, citing “a deterioration in the bank’s financial record.”

First Republic

The debt rating has been cut to B2 from Baa1, Moody’s said. S&P Fitch and Global Ratings downgraded First Republic Bank debt earlier this week.

“The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges facing First Republic Bank over the medium term due to the falsification of the financial record,” Moody’s analysts said in a press release. The bank is increasingly reliant on short-term funding and has higher wholesale costs due to outflows.” .

They cite many recent developments with First Republic, including the company’s Thursday disclosure that last week its Federal Reserve loans ranged from $20 billion to $109 billion. la. Also Thursday, the The bank received $30 billion worth of deposits from 11 major US banks.

“Moody’s believes that the high cost of these loans, combined with the high ratio of fixed-rate assets at the bank, is likely to have a major negative impact on First Republic’s core profitability in the coming years. coming quarters,” the analysts said. “Additionally, the rating agency noted that while news on banking group deposits is positive in the short term, the long-term path for the bank to return to sustainable profitability remains uncertain. sure.”

First Republic is reportedly looking to raise money from banks or other private equity firms by selling more shares, according to the New York Times.

The company’s shares have fallen 80% since the close of trading on March 8, just before Silicon Valley Bank spooked investors with an update on its business and plans. sell shares. First Republic lost 33% in Friday trading despite deposit agreements with major banks. Shares fell another 6% in the extended session on Friday.

Moody’s said its outlook was maintained at “rated under review”. The downgrade review “reflects ongoing challenges to the bank’s medium-term credit profile due to a significantly eroded deposit base, growing reliance on wholesale funding, short term and large volume of unrealized losses on the bank’s investment securities.”


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