Ratings agency Moody’s downgraded First Republic Bank’s rating on Friday, citing the bank’s worsening financial situation and difficulties the company was experiencing as a result of an increased reliance on outside funding amid deposit outflows.
The agency downgraded the bank’s long-term issuer rating, local currency subordinate rating, and long-term local currency bank deposit rating, among others, to B2 from Baa1 and Baa3 from A1, respectively.
The outlook for First Republic Bank’s issuer rating and long-term bank deposits “remains under review,” according to Moody’s.
It predicts that First Republic’s core profitability will be greatly impacted in the upcoming quarters by the bank’s high cost of borrowing and “strong proportion of fixed rate assets at the bank.”
In addition, Moody’s predicted that the Federal Reserve will keep tightening its monetary policy, in contrast to some other analysts who believe that this month’s bank failures may change the trajectory of future interest rate increases.