After UBS took over Credit Suisse four days ago and a dozen financial institutions injected $30 billion into First Republic Bank, S&P Global said Sunday that First Republic’s shares downgraded to junk status. Investors are concerned that the cash infusion from 11 major financial institutions may not address the bank’s liquidity problems. First Republic’s stock fell more than 15% Monday morning when Wall Street opened and was down more than 25% at 1:15 p.m. ET.
First Republic Bank’s stock fell 25% despite a $30B cash infusion from 11 lenders last week
On Monday, March 20, 2023, at approximately 1:15 p.m. Eastern time, the stock price of San Francisco-based First Republic Bank (NYSE: FRC) fell more than 25% against the U.S. dollar. Commercial banks and wealth management services providers have recently been on a tear, with Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, BNY Mellon, PNC Bank, State Street, Truist Bank, US Bank, and 11 other large banks received $30 billion.
But the cash infusion has not helped First Republic as S&P Global has reduced the bank’s equity (FRC) tojunk statusdowngraded FRC citing concerns that the recent support from 11 banks may not alleviate First Republic’s problems. This was the second downgrade of FRC in less than a week. First Republic is attempting to raise capital by issuing additional shares and seeking investment from private equity firms and smaller banks.
This is First Republic’s second attempt to raise capital sinceMarch 10
and six days after receiving a deposit infusion from a large lender.CNN contributor Alison Morrow notes that First Republic is a “Bay Area-based, deep-pocketed customer base of lenders” and was told that it faces a similar fate to Silicon Valley Bank (SVB). Patricia McCoy, a law professor at Boston College, told,Morrow said that depositors are “particularly prone to triggers.”
“They are sophisticated, they know they have other options, and they have mechanisms to move money quickly,” McCoy added.
At 1:15 p.m. ET on March 20, 2023, First Republic’s stock is down more than 25% this afternoon, trading at just above$17 per share. While other banks weathered the storm on Monday following the Credit Suisse acquisition, the bank’s stock hit an intraday low
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