First Republic’s shares drop more than 17% after downgraded credit rating

theguardian.com:

Shares in First Republic Bank dropped more than 17% on Monday, after reports the San Francisco-based bank may need to raise more funds despite a $30bn (£24bn) rescue last week.

The credit rating of the regional bank was downgraded deeper into junk status by S&P Global. The agency said that the bank, which caters to wealthy clients, likely faced “high liquidity stress with substantial outflows”.

Last week, First Republic increased borrowings from the US Federal Reserve and the suspended its common stock dividend despite holding about $213bn in assets and $176bn in deposits.

On Sunday, Reuters reported that the lender was still trying to put together a deal to raise capital, days after 11 of the biggest names in US banking, including JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs kicked in $30bn.

In a regulatory filing, the First Republic executive chairman, Jim Herbert, and the CEO, Mike Roffler, said the cash injection “is a vote of confidence for First Republic and the entire US banking system”.

But First Republic’s shares have lost 80% of their value over the past 10 days on fears of a bank run. Like the collapsed Silicon Valley Bank, a large proportion of First Republic’s customers hold more than $250,000 guaranteed by federal insurance.

About 70% of First Republic’s deposits are uninsured, well-above a 55% average for medium-sized banks, a figure that puts the bank third after Silicon Valley Bank (94%) and Signature Bank (90%), according to Bank of America.

The Wall Street Journal reported on Friday that First Republic’s lending business “revolves around making huge mortgages to such clients as Mark Zuckerberg”. Dependence on property, personal and commercial loans concerns analysts as they cannot be rapidly