S&P downgrades First Republic further into junk status as the bank's $30 billion rescue may not be enough to solve liquidity problems
, among the reverberations from this month's collapse of Silicon Valley Bank after a $1.8 billion bond-related loss kicked off a stampede of withdrawals at that bank. that JPMorgan CEO Jamie Dimon was leading talks among big banks to provide even more aid to stabilize First Republic. Shares crashed as much as 50% before paring losses. The stock has lost 85% of its value this month.
First Republic over the past week"was likely under high liquidity stress with substantial deposit outflows," based in part by the deposit plan by 11 large US banks,They cut the First Republic's long-term issuer credit rating to B+ from BB+, and warned, in keeping its ratings on negative credit watch, that another downgrade may occur.
S&P Global noted First Republic last week reported a cash position of $34 billion, not including the $30 billion in deposits from the 11 banks. The infusion of deposits should ease its near-term liquidity pressures. However,"it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing," Wetzel and Pressman wrote. the package strengthened its liquidity position and served as"a vote of confidence for First Republic and the entire US banking system.
Meanwhile, shares of PacWest and Western Alliance Bancorp were mixed Monday after weekend updates from those regional lenders. PacWestWestern Alliance said itPacWest was up 9% and Western Alliance turned down to trade nearly 5% lower.
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