Key Takeaways:
- First Republic Bank saw its ratings cut to junk by ratings agencies.
- Meanwhile, FRC price dropped 75% in seven days.
NEW DELHI (CoinChapter.com) — The collapse of Silicon Valley Bank seems to have triggered a contagion. After Signature Bank, First Republic Bank (NYSE: FRC) seems likely to be the next victim of the current US economic scenario.
First Republic Bank share price dropped 75% over the past seven days to reach a daily low of $29.45 on Mar 15. The bank’s statement on Mar 12, claiming it had more than $70 billion in unopened liquidity, failed to stem the downfall.
SVB’s collapse has harmed other large banking institutions. After the decline in FRC share price, the exchanges halted trading.
The additional borrowing capacity from the Federal Reserve, continued access to funding through the Federal Home Loan Bank, and ability to access additional financing through JPMorgan Chase & Co. increases, diversifies, and further strengthens First Republic’s existing liquidity profile
First Republic Bank officials told Bloomberg
Not just in the US, bank stocks in Europe plummeted, although analysts affirmed the region should remain immune to the SVB crisis.
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Meanwhile, First Republic Bank’s ratings were cut to junk by various agencies. First, s&P Global Ratings lowered the bank’s rating to BB+ from A- and put it on credit watch negative. Shortly after, Fitch cut the bank’s rating to BB from A-.
Today’s action reflects Fitch’s revised view of FRC’s funding and liquidity profile in the current environment. In this regard, Fitch believes that FRC’s funding and liquidity profile has changed and represents a “weakest link” relative to other rating factors.
Fitch said in a report.
Furthermore, Moody’s Investors Service put the First Republic Bank on review for a potential downgrade and cut its outlook for the entire US banking sector. In addition, Moody’s placed five other banks on review for downgrade.
FRC Stock Price Recovers Slightly But Bears Still In Control
FRC stock price painted a marginal recovery on Mar 15, spiking 29% to a high of $37.8 before bears pared gains. Long upper wicks on the First Republic Bank stock’s recent price daily candles underscore the bearish pressure against FRC.
If Moody’s decides to downgrade First Republic, selling pressure against FRC share price would likely increase. As a result, FRC stock price could end up falling to test support near $28.7. Breaching immediate support could force First Republic Bank’s share price to drop to support near $22 before recovering.
Meanwhile, the relative strength index of FRC stocks dropped into the oversold region on Mar 8, and has since remained there, currently clocking at 13.34 on the daily charts. Usually, oversold RSI levels forecast a bullish trend reversal for an asset, but it seems bearish pressure against FRC is very high.
If FRC share price starts increasing, First Republic Bank share price could rise to resistance near $33. A break and hold above immediate resistance could help FRC stocks price target resistance near $39 before downside corrections pare gains.
