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S&P Demotes First Republic Bank Rating to Junk Status

The beginning of 2023 brought promising news for the cryptocurrency world, but the banking sector faced an unexpected decline. Major banks, including Silvergate Bank, Silicon Valley Bank, and Signature Bank, have experienced significant setbacks.

First Republic Bank
First Republic Bank

Credit Suisse and Moody's Negative Outlook on US Banking

Credit Suisse Bank recently drew attention due to falling shares, driven by a statement from its largest shareholder. Additionally, Moody's Investors Service downgraded the US banking system's outlook from stable to negative, primarily due to the collapse of Silicon Valley Bank, one of the biggest banking failures since the 2008 financial crisis.

First Republic Bank Rating Plunges to Junk

S&P has now downgraded First Republic Bank's rating to "junk" status. Analysts Nicholas Wetzel and Rian Pressman explained that the bank's business position is negatively affected by volatile stock prices and increased media attention on deposit volatility, resulting in weaker business stability and declining creditworthiness perceptions.

First Republic Bank
First Republic Bank

First Republic Bank Stock Drops 8.15%

At the time of writing, First Republic Bank's stock price had fallen 8.15%, reaching $36.4. S&P's downgrade resulted from outflow risk concerns, despite increased borrowing availability.

Junk Bond Classification and S&P's Actions

The top three rating companies, Standard & Poor's (S&P), Fitch, and Moody's, evaluate bond creditworthiness. Bonds with poor credit ratings are junk or non-investment grade bonds. S&P lowered First Republic Bank's rating from A- to BB+, citing rising outflow risk, following US regulators' pledge to support the banking sector.