After UBS acquired Credit Suisse and about a dozen financial institutions pumped $30 billion into First Republic Bank four days ago, S&P Global downgraded First Republic shares to junk status on Sunday. Investors are concerned that the cash injection from 11 major financial institutions will not solve the bank’s liquidity problems. First Republic shares were down more than 15% Monday morning when Wall Street opened, and as of 1:15 pm ET, shares were down more than 25%.
First Republic Bank shares down 25% despite a $30 billion cash injection from 11 lenders last week
At around 1:15 p.m. ET on Monday, March 20, 2023, shares of First Republic Bank (NYSE: FRC) were down more than 25% against the US dollar. The commercial bank and provider of wealth management services recently received $30 billion from 11 major banks, including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, BNY Mellon, PNC Bank, State Street, Truist Bank and US Bank, on March 16.
However, the cash injection has not helped First Republic as S&P Global reduced the shares of the bank (FRC) to junk state, citing concerns that the recent aid from 11 banks will not ease First Republic’s woes. This was the second FRC downgrade in less than a week. First Republic has tried raise capital by issuing more shares and seeking investment from private equity firms and smaller banks.
This is the second attempt by the First Republic to raise capital since March 10th, and then received the deposit injection from the major lenders six days later. CNN contributor Allison Morrow was told that First Republic faces a similar fate to Silicon Valley Bank (SVB) because it is a “Bay Area-based lender with a wealthy customer base “. Patricia McCoy, a professor of law at Boston College, said Morrow that depositors are “particularly prone to shooting.”
“They are sophisticated, they know they have other options, and they have mechanisms to move money around quickly,” McCoy added.
At 1:15 p.m. $17 per share. The bank’s shares hit an intraday record low while other banks managed to weather the storm on Monday after the purchase of Credit Suisse.
What do you think of S&P Global downgrading First Republic Bank shares to junk status on Sunday? Share your thoughts on this topic in the comments section below.
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