S&P Global Ratings downgraded its issuer credit rating on First Republic Bank FRC, -16.57% by four notches to BB-plus from A-minus on Wednesday, placing it in speculative grade, or ‘junk,’ status. The move come after it had put the bank on review for a downgrade late Tuesday. The agency cited concerns about increased wholesale borrowings further weighing on the regional bank’s net interest margin. “We believe the risk of deposit outflows is elevated at First Republic Bank despite the actions of federal banking regulators and the bank actively increasing its borrowing availability to mitigate risk associated with the bank failures over the last week,” S&P said in a statement. “We believe that First Republic’s deposit base is more concentrated than most large U.S. regional banks, which presents heightened funding risks in the current environment,” it added. The move will raise borrowing costs for First Republic and dent its image, making other corporate debt more attractive to investors. The news sent First Republic’s already battered stock down 16%.
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