First Republic Bank saw its credit ratings downgraded deeper into junk status by S&P Global, which said the lender’s recent $30 billion deposit infusion from 11 big banks may not solve its liquidity problems.S&P cut First Republic’s credit rating three notches to “B-plus” from “BB-plus,” and warned that another downgrade is possible. Other ratings were also lowered.
The agency said First Republic likely faced “high liquidity stress with substantial outflows” last week, reflecting its need for more deposits, increased borrowings from the Federal Reserve, and the suspension of its common stock dividend.
It said that while the deposit infusion should ease near-term liquidity pressures, it “may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing.”
Sunday’s downgrade by S&P was the second in four days for First Republic, which previously held an “A-minus” credit rating.
It could add to market concerns about the San Francisco-based bank, which has scrambled to assure investors and depositors about its health following this month’s collapses of Silicon Valley Bank, which also served many wealthy clients, and Signature Bank.
Another rating agency, Moody’s Investors Service, downgraded First Republic to junk status on Friday.
In a statement following the S&P downgrade, First Republic said the new deposits and cash on hand leave it “well positioned to manage short-term deposit activity. This support reflects confidence in First Republic and its ability to continue to provide unwavering exceptional service to its clients and communities.”
The statement echoed a joint statement on Thursday from the four largest U.S. banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — that together deposited $20 billion.
First Republic shares plunged 32.8% on Friday to $23.03, reflecting concern that more trouble lies ahead.
The shares have fallen 80% since March 8, when Silicon Valley Bank’s parent SVB Financial Group shocked investors by revealing big investment losses and a need for new capital, sparking a bank run.
March 17 (Reuters) - Pacific Western Bank, a unit of PacWest Bankcorp (PACW.O), said on Friday it had witnessed 'elevated' withdrawals following the collapses of Silicon Valley Bank and Signature Bank, but deposit movements had stabilized since Monday.
The Los Angeles-based bank gave no details on the sum of the withdrawals but said they were mainly from its venture banking business line.
In a statement, Pacific Western Bank said it still maintained solid liquidity, with available cash exceeding $10.8 billion as of Friday.
The statement late on Friday came after PacWest's shares had slumped 19%, ending the week that was dominated by an unfolding crisis in the banking sector.
"Since Monday, March 13, 2023, net outflows have fallen sharply, with deposit balance fluctuations substantially stabilizing," it said in a statement.
Pacific Western Bank said that as of March 16, insured deposits accounted for over 62% of total deposits, while insured venture-specific deposits made up more than 77% of total venture deposits.
The bank also said it had a diversified deposit base with venture deposits comprising approximately 25% of total deposits.
Pacific Western Bank's announcement came after Reuters reported on Thursday that PacWest was in talks about a liquidity boost with Atlas SP Partners and other investment firms.
