NEW YORK (CNN) – Moody’s Investors Service late Monday reviewed six U.S. banks for possible credit rating downgrades in the wake of the Silicon Valley bank collapse.
The rating firm also downgraded Signature Bank deep into junk territory following that bank’s collapse. Rating downgrades can make it more expensive for companies to borrow money.
Moody’s warned of similar downgrades to First Republic Bank (FRC), Zions (ZION), Western Alliance (WAL), Comerica (CMA), UMB Financial (UMBF) and Intrust Financial. The company cited the “extremely volatile funding conditions for some US banks, which face the risk of uninsured deposit outflows.”
The move comes after shares in regional banks were slammed on Monday, even after the US federal government stepped in with massive intervention to protect depositors and prevent more bank runs. Regional bank stocks rallied in premarket trading on Tuesday.
For the San Francisco-based First Republic, Moody’s noted the bank’s “high reliance on more confidence-sensitive uninsured deposit funding,” high unrealized losses in its bond holdings, and “low capitalization” relative to its peers.
First Republic has a large amount of deposits in excess of the FDIC’s insurance limit, Moody’s said, noting that this makes the bank’s funding profile “more vulnerable to rapid and large deposit withdrawals.”
After a 62% plunge on Monday, shares in the First Republic rose 24% in premarket trading on Tuesday.