Moody’s has reduced the debt of First Republic Bank to scrap

Moody’s analysts said in a statement that the downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term given its increasing reliance on high-cost, short-term wholesale financing due to deposit outflows.” .

They cited several recent developments with First Republic, including the company’s disclosure Thursday that over the past week Fed loans ranged from $20 billion to $109 billion. Also on Thursday, the bank received a $30 billion deposit infusion from 11 major US banks.

“Moody’s believes that the higher cost of these loans, coupled with the bank’s high proportion of fixed-rate assets, is likely to have a significant negative impact on First Republic’s underlying profitability in the coming quarters,” the analysts said. In addition, the rating agency noted that while news of bank consortium deposits is positive in the short term, the bank’s long-term path back to sustainable profitability remains uncertain.

First Republic is said to be looking to raise money from other banks or private equity firms by selling additional shares, According to The New York Times.

Shares of the company have fallen 80% since closing trading on March 8, before the Silicon Valley bank spooked investors with updates on its business and a planned stock sale. First Republic lost 33% in Friday’s session despite arranging deposits with major banks. Shares fell another 6% in the extended session on Friday.

Moody’s said its outlook remained at a “rating under review”. It said the downgrade revision “reflects ongoing challenges to the medium-term bank’s credit profile in light of its significantly deteriorating deposit base, increased reliance on short-term wholesale funding and a large volume of unrealized losses on investment securities.”