San Francisco-based First Republic Bank (NYSE:FRC) seems to be falling deeper into the pit with more downgrades from rating agencies. On Sunday, March 19, S&P Global (NYSE:SPGI) further downgraded FRC’s credit rating to “B-plus” from “BB-plus”, per a CNBC report. The rating agency also downgraded other ratings for FRC and mentioned the possibility of further downgrades. On Friday alone, FRC shares lost nearly 33% and fell more than 15% in after-hours trading on growing concerns about financial stability.
S&P is concerned about First Republic’s “high liquidity stress” coupled with “substantial outflows”. It believes that the $30 billion deposit injected by 11 major US banks will only solve short-term liquidity problems and may not be enough to save it from future financial problems. S&P called the bank’s “substantial business, liquidity, financing and profitability challenges” a major concern going forward. The rating agency also noted that FRC may need further cash infusions and loans from the Federal Reserve, and may need to suspend its common stock dividend.
S&P Global’s downgrade follows another downgrade by Moody’s (NYSE: MCO) on March 17. Moody’s downgraded the status of FRC’s long-term issuer rating, local currency subordinate rating, and long-term local currency bank deposit rating.
In addition, according to a New York Times (NYSE:NYT) report, FRC plans to raise more money by selling shares privately. According to Friday’s report, the bank is in talks with other banks and private equity firms for additional cash issuance, and a full sale of the bank may also be on the horizon. The FRC share lost 28.7% in the last five trading sessions and is down 81% so far in 2023.
Is FRC Shares Buy, Hold or Sell?
Based on the various rating downgrades and uncertainty about FRC’s future trajectory, analysts have a Hold consensus rating for the stock. On TipRanks, First Republic’s average price target of $142.88 implies massive 520.4% upside potential from current levels.
Leave a Reply