- Banks, including Western Alliance and Comerica, have had their ratings placed under review.
- Following the failure of Silicon Valley Bank, US bank stocks suffered a severe blow.
Moody’s Investors Service has initiated a review for potential downgrade on First Republic Bank and five other US lenders, indicating mounting apprehension about the stability of regional financial institutions after the recent failure of Silicon Valley Bank.
Moody’s has also placed Western Alliance Bancorp, UMB Financial Corp, Zions Bancorp, Intrust Financial Corp,and Comerica Inc. under review for a potential downgrade, citing worries about these lenders’ dependence on uninsured deposits for funding and unrealized losses in their asset portfolios.
This action was taken following a downturn in US bank stocks, despite the government’s efforts to rescue Silicon Valley Bank’s depositors and establish a new lending facility to aid lenders’ financing and prevent further bank runs. Moody’s has also lowered the credit rating of Signature Bank and retracted its credit rating after the bank’s closure during the weekend.
On Monday, shares of First Republic, based in San Francisco, witnessed a record-breaking drop of 62%, while Phoenix-based Western Alliance experienced an unprecedented decline of 47%, and Dallas-based Comerica fell by 28%.
Moody’s has stated that First Republic’s funding profile is particularly sensitive to rapid, substantial withdrawals due to its proportion of deposits that surpass the Federal insurance threshold.
“If it were to face higher-than-anticipated deposit outflows and liquidity backstops proved insufficient, the bank could need to sell assets, thus crystallizing unrealized losses,” Moody’s said. As of December, it added that more than a third of First Republic’s common equity tier-1 capital was composed of available-for-sale and held-to-maturity securities.
Earlier, First Republic had announced that it had strengthened and diversified its financial position by gaining access to extra liquidity from JPMorgan Chase & Co. and the Federal Reserve.
