In an attempt to save First Republic Bank, several mainstream banking giants have decided to come to the bank’s aid with a total deposit of $30 billion.
Shares of San Francisco-based financial services firm First Republic Bank (NYSE: FRC) are falling in pre-market today after the firm secured a downgrade from leading credit ratings agency S&P Global Ratings. As reported Per CNBC, the struggling bank was downgraded to B+ from BB+ over the weekend after first being downgraded to junk last week.
First Republic Bank’s troubles stem from the aftermath of the Silicon Valley Bank (SVB) collapse, which has put the company’s depositors on the brink of the blurry future of banks with no protection for uninsured deposits. For First Republic Bank, the potential for significant bank runs exists, and as such, S&P has kept the company’s stock on its CreditWatch Negative list.
Ratings from agencies like S&P are a major litmus test for companies and even governments around the world. While the ratings firm made its downgrade based on available data based on the company’s performance, surviving investor reactions can be the strengthening shield the company needs to build a future of entirely new growth.
As of this writing, First Republic shares are down 18.11% premarket to $18.86 per share. Stocks closed Friday’s session a steeper cut of 32.80% in what appears to be a relentless attempt by investors to dump the token.
For First Republic Bank, only drastic action can save it at this point, even though the SPDR S&P regional banking ETF showed a positive 2% rally around the same time FRC shares fell to their current state.
At Saving First Republic Bank
In an attempt to save First Republic Bank, a number of traditional banking giants have decided to come to the bank’s aid with a total deposit of $30 billion. This projected fund will supplement the $34 billion the embattled company said it has in reserve through March 15.
The cash injections from the largest banks were said to have been made in a bid to bolster confidence in regional US banks.
“The infusion of deposits from 11 US banks, the company’s disclosure that Fed loans range from $20 billion to $109 billion, and Federal Home Loan Bank (FHLB) loans increased by $10 billion million, and the suspension of its common stock dividend leads collectively made us think the bank was probably under high liquidity stress with substantial deposit outflows over the past week,” S&P said in its note on Sunday.
For First Republic Bank, a more intuitive effort must be put in place to allay customer fears that it can run their home without further intervention. If this can be guaranteed, the bank might have a little less to worry about compared to the S&P rating.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
