Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank’s financial profile.” First Republic’s FRC, -32.80% debt rating was upgraded to B2, the first tier of non-investment grade, from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week. The downgrade “reflects the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces in the medium term in light of its increased reliance on short-term and high-cost wholesale funding due to deposit outflows,” Moody’s analysts said in a release. . They cited various recent developments with First Republic, including the company’s announcement Thursday that its Federal Reserve debt last week went from $20 billion to $109 billion. Also on Thursday, the bank received a $30 billion deposit infusion from 11 major US banks. “Moody’s believes that this high cost of debt, coupled with the bank’s high proportion of fixed-rate assets, is likely to have a major negative impact on First Republic’s core profitability in the coming quarters,” the analysts said. “Furthermore, the rating agency noted that while news of the banking consortium’s deposits is positive in the short term, the long-term path for the bank to return to sustained profitability remains uncertain.” According to the New York Times, First Republic is considering raising money from other banks or private-equity firms by selling additional shares. The company’s shares have plunged 80% since the close of trading on March 8, before the Silicon Valley bank spooked investors with an update on its business and a planned stock sale. First Republic lost 33% in Friday’s session despite deposit arrangements with major banks. Shares were down another 6% in the extended session on Friday. “Issuer ratings and the outlook on long-term bank deposits remain under review,” Moody’s said.
