Moody’s Investors Service placed six U.S. banks under review for possible downgrades on Monday night, following last week’s collapse of Bank of Silicon Valley.
The credit rating firm also downgraded Signature Bank to junk territory following that bank’s bankruptcy.
Moody’s has warned it may also downgrade First Republic Bank
(IF WE)western alliance
(UMBF) and Intrust Financial. The firm cited “extremely volatile funding conditions for some US banks exposed to the risk of uninsured deposit outflows.”
Moving comes later shares of regional banks was beaten on Monday even after the US federal government stepped in with a massive intervention aimed at protecting depositors and preventing further bank runs. Shares of regional banks rebounded in premarket trading on Tuesday.
For San Francisco-based First Republic, Moody’s pointed to the bank’s “heavy reliance on more confidence-sensitive uninsured deposit funding”, high unrealized losses in its bond holdings and a ” low level of capitalization” compared to its peers.
The First Republic has a high amount of deposits above the FDIC’s insurance limit, Moody’s said, noting that this makes the bank’s funding profile “more sensitive to rapid and large withdrawals of deposits.”
After plunging 62% on Monday, First Republic shares soared 24% in premarket trading on Tuesday.