First Republic debt downgraded to junk by Fitch on deposit concentration

Fitch Ratings downgraded First Republic Bank’s Long-Term Issuer Default Rating to "BB" from "A-" and Short-Term IDR to "B" from "F1." In addition, the ratings were placed on "Rating Watch Negative." First Republic’s deposit concentrations are now viewed as a rating weakness, Fitch said in a statement. The rating agency views the bank’s deposit base as concentrated given its strategic focus on "banking wealthy and financially sophisticated customers in select urban coastal markets in the U.S." This "not only drives a high proportion of uninsured deposits as a percentage of total deposits but also results in deposits that can be less sticky in times of crisis or severe stress," Fitch contends. Shares of First Republic are down 18% to $32.57 in midday trading.