First Republic Shares Plunge on Sale Possibility, Credit Rating Downgrade

Shares of First Republic Bank (FRC) plunged Thursday on a report the struggling regional bank is exploring strategic options, including a sale, and as S&P Global Ratings and Fitch Ratings cut their ratings on its bonds to junk. However, they recovered losses and were trading in positive territory after another report added that several large banks are discussing a plan to pump money into the lender.

S&P Global lowered its rating to BB+ from A-, and placed First Republic on its credit watch list with negative implications. The service said "the risk of deposit outflows is elevated" despite actions by federal regulators and the bank to mitigate risk associated with the failures of Silicon Valley Bank and Signature Bank.

Fitch dropped its rating one notch below that of S&P Global, to BB from A-, and also put it on negative watch. It explained that First Republic’s funding and liquidity profile has changed, and represents "a 'weakest link' relative to other rating factors." Fitch added the bank’s deposit concentrations are now viewed as a rating weakness.

Uninsured Deposits

First Republic has been under pressure since the collapse of Silicon Valley Bank and Signature Bank because 68% of its deposits aren’t insured by the FDIC as they exceed the $250,000 insurance limit, partly due to the bank's focus on serving wealthy clients. This is the highest rate of uninsured deposits for any bank except those two now-closed institutions. 

Shares of First Republic Bank (FRC) have lost over 70% of their value since last Wednesday.