First Republic Bank shares tumble after rating downgrade

The First Republic Bank shares fell to a new all time low Monday after the bank had its credit rating slashed deeper into junk territory over at S&P Global Ratings.

The stock FRC, dropped 20.0% in premarket trading, is on track to open below the October 3, 2011 record low of $22.48.

S&P cut First Republic Bank's long-term issuer rating by three notches, to B from BB, saying the $30 billion rescue package the bank received last week doesn't solve the bank's liquidity problems.

The $30 billion in deposits First Republic reported it will receive from 11 large U.S. banks should ease near-term liquidity pressures, but it may not solve the business, funding, and profitability challenges that the bank is likely to face, S&P said.

The stock went up 10.0% last Thursday after the $30 billion in deposits was announced, but then fell 32.8% on Friday.

The bank's rating remains negative, with S&P warnings that the rating could be downgraded further if it doesn't show any progress in stabilizing deposits.

Based on the company s public disclosure on March 16 that secured borrowings from the Federal Reserve ranged from $20 billion to $109 billion and borrowings from the Federal Home Loan Bank increased by $10 billion over the last week, we think that the outstanding balance of secured borrowings will likely increase to fund sharp deposit outflows that had occurred, S&P said.

The downgrade on Sunday comes just four days after S&P cut the rating by four notches to BB the first speculative grade, or junk rating, from A-.

A B rating at S&P means the entity is more vulnerable to adverse business, financial and economic conditions, but currently has the capacity to meet financial commitments. The stock was on track to open below the $20 level, below the Oct. 3, 2011 record low of $22.48.

Moody s Investors Service cut its rating on First Republic Bank by four notches to junk on Friday, to B 2 from Baa 1, and said the rating remained under review. The stock fell 80.0% through Friday, since the troubles of SVB Financial Group's SIVB. Silicon Valley Bank were first made public after the March 8 close, which led to failures by Silicon Valley Bank and Signature Bank SBNY, and a bankruptcy filing by SVB. Over the same time, the SPDR S&P Regional Bank exchange-traded fund KRE has dropped 25.3%, and the S&P 500 index SPX has fallen 1.9%.