San Francisco-based First Republic Bank (NYSE:FRC) seems to be falling deeper into the pit with more downgrades coming from rating agencies. On Sunday, March 19, S&P Global (NYSE:SPGI) further lowered FRC’s credit rating to “B-plus” from “BB-plus,” per a CNBC report. The rating agency also lowered other ratings for FRC and cited the possibility of further downgrades. On Friday alone, FRC stock lost nearly 33% and was down over 15% in the after-hours trading, owing to the growing concerns about financial stability.
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S&P is concerned about First Republic’s “high liquidity stress” coupled with “substantial outflows.” It believes the $30 billion deposit infused by 11 major U.S. banks will only solve short-term liquidity issues and may not be enough to salvage it from future financial distress. S&P cited the bank’s “substantial business, liquidity, funding, and profitability challenges” as a major cause of concern going forward. The rating agency also noted that FRC may need further cash infusions and borrowings from the Federal Reserve, and may have to suspend its common stock dividend.
S&P Global’s downgrade follows another downgrade by Moody’s (NYSE:MCO) on March 17. Moody’s lowered the status of FRC’s long-term issuer rating, local currency subordinate rating, and long-term local currency bank deposit rating.
Moreover, as per a New York Times (NYSE:NYT) report, FRC is planning to raise further cash by selling shares privately. As per Friday’s report, the bank is in talks with other banks and private equity firms for additional cash issuance, and a full sale of the bank may also be on the horizon. FRC stock has lost 28.7% in the last five trading sessions and is down 81% so far in 2023.
Is FRC Stock a Buy, Hold, or Sell?
Based on the several rating downgrades and uncertainty about FRC’s future trajectory, analysts have a Hold consensus rating on the stock. On TipRanks, the average First Republic price target of $142.88 implies a massive 520.4% upside potential from current levels.
