First Republic Bank (NYSE:FRC) shares are expected to open 33% lower as it reportedly explores options for a sale after a big credit rating agency downgrade.
Just a few days after the collapse of Silicon Valley Bank, analysts from credit rating agency S&P downgraded First Republic's bonds by four tiers, from A- to BB+ rated, prompting the bank to weigh up options to bolster its liquidity.
Rival credit rating agency Moody’s placed its rating on review for a potential downgrade earlier in the week.
Shares in the private and business lender slumped in after-hours trading as a result, slumping to US$31.16, their lowest point since 2012, after contagion fears hit following Silicon Valley and Signature’s collapses in the past week.
According to Bloomberg, First Republic is expected to draw interest from its larger rivals, citing people in the know, though a firm decision is yet to be made and it could still choose to stay independent.
S&P explained First Republic’s deposit flows had become volatile over the past week, anticipating it would “increase wholesale borrowings to shore up its on-balance-sheet liquidity,” likely weighing in on “already modest” profits.