Credit bureaus give First Republic junk status to Bank of America
Credit rating agency S&P Global has turned more negative on the financial health of American bank First Republic. According to analysts, the risk of many customers withdrawing their money from regional banks after the collapse of two US banks last weekend is even higher. First Republic now carries a BB+ rating, dropping its credit rating below the junk-credit mark in many places.
That means lending money to a bank is one of the riskier investments. The downgrade followed the collapse of Silicon Valley Bank (SVB) in San Francisco and Signature Bank in New York. Both lenders had to deal with customers who came to collect their loans in bulk from the bank.
According to S&P Global, First Republic is riskier than comparable banks in the United States. This is because the overall pool of account holders at this bank is less diverse than comparable peers.
The one-sided board of depositors at SVB has already led to criticism. The bank mainly attracted clients from the tech and startup world around San Francisco. But due to the less favorable economic outlook, these companies in particular needed more of their assets, resulting in above-average cash outflows.
First Republic is the 14th largest bank in the United States by balance sheet size. The San Francisco bank has $212 billion in investments and more than $176 billion in deposits.
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