First Republic Bank has been slammed with another downgrade from S&P, with the credit rating agency suggesting long-term issues would not be solved by support from larger lenders.
S&P booted the struggling bank from a B+ to a BB- rating, down three steps, adding further downgrades were not off the table.
It pointed towards First Republic’s likely “high liquidity stress” and “substantial outflows” last week, suggesting long-term issues were unlikely to be resolved through a US$30bn deposit infusion from larger banks.
This “may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing,” S&P said.
JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) were among the 11 banks which moved to support First Republic last Thursday, prompting it to reassure it was well equipped to “manage short-term deposit activity” on Sunday.
This was not enough to prevent Sunday’s downgrade by S&P though, which followed its move to class First Republic as ‘junk’ just last week, alongside Moody’s on Friday.
First Republic shares slumped 32.8% on Friday and were down 33% in early trading Monday as a result of its woes, sparked by the collapse of Silicon Valley Bank earlier in March.