Moody’s Investors Service placed six US banks on review for potential downgrades late Monday, in the wake of last week’s collapse of Silicon Valley Bank.
The credit ratings firm also downgraded Signature Bank deep into junk territory following that bank’s failure.
Moody’s warned it could similarly downgrade First Republic Bank
(ZION), Western Alliance
(CMA), UMB Financial
(UMBF) and Intrust Financial. The firm cited the “extremely volatile funding conditions for some US banks exposed to the risk of uninsured deposit outflows.”
The move comes after shares of regional banks got clobbered on Monday even after the US federal government stepped in with a massive intervention designed to protect depositors and prevent further bank runs. Regional bank shares rebounded in premarket trading on Tuesday.
For San Francisco-based First Republic, Moody’s pointed to the bank’s “high reliance on more confidence-sensitive uninsured deposit funding,” high unrealized losses in its bond holdings and a “low level of capitalization” relative to its peers.
First Republic has a high amount of deposits above the FDIC’s insurance limit, Moody’s said, noting this makes the bank’s funding profile “more sensitive to rapid and large withdrawals from deposits.”
After plunging 62% on Monday, First Republic shares climbed 24% in premarket trading on Tuesday.