Moody’s Investors Service placed six other US banks on review for potential downgrades late Monday, following last week’s collapse of Silicon Valley Bank.
The credit ratings firm also downgraded Signature Bank deep into junk territory following that bank’s failure.
Moody’s warned it could similarly downgrade First Republic Bank, Zions, Western Alliance, Comerica, UMB Financial and Intrust Financial. The firm cited the “extremely volatile funding conditions for some US banks exposed to the risk of uninsured deposit outflows.”
The move comes after shares of regional banks got clobbered on Monday even after the federal government stepped in with a massive intervention designed to prevent depositors and prevent further bank runs. Regional bank shares are rebounding in premarket trading on Tuesday.
For San Francisco-based First Republic, Moody’s pointed to the bank’s “high reliance on more confidence sensitive uninsured deposit funding,” high unrealized losses in its bond holdings and a “low level of capitalization” relative to its peers.
First Republic has a high amount of deposits above the FDIC’s insurance limit, Moody’s said, noting this makes the bank’s funding profile “more sensitive to rapid and large withdrawals from deposits.”
After plunging 62% on Monday, First Republic shares are climbing 24% in premarket trading on Tuesday.