Shares in First Republic Bank plunged in US premarket trading on Monday, as S&P Global Inc. cut its credit rating for the second time in a week, warning that a $30 billion rescue deal had not resolved the lender’s challenges.
(Bloomberg) — Shares in First Republic Bank plunged in US premarket trading on Monday, as S&P Global Inc. cut its credit rating for the second time in a week, warning that a $30 billion rescue deal had not resolved the lender’s challenges.
The ratings cut puts First Republic on track to extend its rout, having already shed 80% in a matter of 10 days. Shares lost as much as 37% before recouping half those losses.
S&P lowered First Republic’s long-term issuer credit rating to B+ from BB+, having already downgraded the lender to sub-investment grade, or junk, territory last Wednesday. The ratings agency said a recent $30 billion infusion from some of Wall Street’s biggest lenders may not solve the “substantial” challenges the bank is now likely facing, even if it does ease near-term pressure on liquidity.
However, some midsized US lenders rose in premarket trading. New York Community Bankcorp shares jumped as much as 19% after taking over Signature Bank’s deposits and some of its loans. Shares in some regional banks outperformed, with Western Alliance Bancorp briefly turning positive and PacWest Bancorp gaining 5.6%.
Wall Street’s bigger lenders stayed under pressure though, with JPMorgan Chase & Co. down 1.2% in New York premarket trading. Wells Fargo & Co. lost 0.2%, while Bank of America Corp. and Citigroup Inc nudged down about 0.5%.
Investors worldwide are watching for signs of fresh troubles following the collapse of US Silicon Valley Bank and the deposit aid for First Republic. The episodes have sparked worries of deposit flight from regional banks, harming liquidity and potentially sparking a credit crunch. The US KBW Bank Index last week shed 15% of its value.
On Monday, shares in UBS Group AG slumped, as its emergency Sunday takeover of Swiss rival Credit Suisse Group AG led to the wipeouit of some riskier bonds and raised wories about the new, larger lender.
READ MORE, US Banks on ‘Bumpy’ Path as First Republic’s Troubles Persist
(Updates to add detail from S&P downgrade and updates premarket share prices.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.