New York (CNN) Moody’s Investors Service late Monday assessed six U.S. banks for possible credit downgrades in the wake of last week’s Silicon Valley Bank collapse.
The credit rating agency also downgraded Signature Bank deep into junk territory following that bank’s bankruptcy. Rating downgrades can make it more expensive for companies to borrow money.
Moody’s warned it could downgrade in the same way Bank of the First Republic (FRC), Zions (ZION), Western Alliance (WAL), Comerica (CMA), UMB Financial (UMBF) and trust financially. The company cited the “extremely volatile funding conditions for some U.S. banks exposed to the risk of uninsured deposit outflows.”
The move comes after shares of regional banks took a beating on Monday, even after the US federal government stepped in with a massive intervention to protect depositors and prevent further bank runs. Regional banking stocks rallied in premarket trading on Tuesday.
For San Francisco-based First Republic, Moody’s pointed to the bank’s “heavy reliance on more trust-sensitive uninsured deposit funding,” high unrealized losses in its bond holdings, and a “low level of capitalization” compared to its peers.
First Republic has a high amount of deposits above the FDIC’s insurance limit, Moody’s said, noting that this makes the bank’s funding profile “more sensitive to rapid and large deposit withdrawals.”
After a 62% plunge on Monday, shares of First Republic rose 24% in premarket trading on Tuesday.
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