Following the collapse of Silicon Valley Bank, Moody’s Investor Service put First Republic, Western Alliance Bancorp, Intrust Financial Corp, UMB Financial Corp, Zions Bancorp, and Comerica Inc under review for a downgrade.
It is the most recent indication of concern regarding the stability of local financial institutions. Moody’s expresses concerns about the lender’s reliance on uninsured deposit funding and unrealized losses in their asset portfolios.
The action was taken after Silicon Valley Bank stocks collapsed, and the government rescued its depositors while announcing a new loan facility to boost the financing of banks and stop additional bank runs. Following Signature Bank’s weekend closure, Moody’s also downgraded the lender and revoked its credit rating.
The First Republic fell a historic 62% Monday, while Western Alliance fell an unprecedented 47%. Comerica fell 28% and others, Intrust, Zions, and UMB with a particular percentage.
According to Moody’s, First Republic’s financing profile is more vulnerable to sudden, sizable withdrawals because a portion of its deposits exceeds the Federal insurance threshold.
First Republic previously stated that by gaining access to extra liquidity from the Federal Reserve and JPMorgan Chase & Co., it has improved and diversified its financial position.
The fall of Silicon Valley Bank is considered the second-largest bank failure in American history. The US hadn’t witnessed such a downfall since the financial crisis in 2018. The Department of Financial Protection and Innovation (DFPI) seized the bank and turned it over to the Federal Deposit Insurance Corporation (FDIC) for receivership.
The credit ratings of Silicon Valley Bank and SVB Financial Group were reduced by Moody’s Investors Service on Monday. The call was made when SVB’s investment value in bonds decreased sharply as a result of increasing interest rates.
After that, Moody downgraded Silicon Valley Bank’s credit ratings from Baa1 to C and its long-term local currency bank deposit from A1 to Caa2.
The bond credit rating division of Moody’s Corporation is known as Moody’s Investors Service, or simply Moody’s. This division represents the company’s traditional business and bears its old name.
Bonds issued by corporate and governmental bodies are the subject of an International financial study by Moody’s. It is one of the big three credit rating organizations along with Standard & Poor’s and Fitch Group.
By measuring potential investor loss in the event of default, the company uses a standardized rating system to rate the creditworthiness of debtors. The securities rated by Moody’s Investors Service range in quality from Aaa to C, with Aaa being the highest grade and C being the lowest.
As already mentioned, Moody’s is going to review the First Republic, Western AllianceBancorp, Intrust Financial Corp, UMB Financial Corp, Zions Bancorp, and Comerica Inc., as a follow-up to the collapse of SVB. Moody’s will rate these businesses with appropriate credit after evaluating their creditworthiness.
Do you want to know more about these six financial service institutions and how the SVB collapse affected them? Here’s everything you need to know.
First Republic Bank Losses Capital As SVB Collapses
First Republic Bank shares dropped a record 67% at the opening despite the bank’s statement late Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements, including those with the Federal Reserve and JPMorgan Chase & Co., to continue Silicon Valley Bank’s effect over the other financial firms in the stock market.
According to First Republic Bank, the additional fund is available through the Fed’s new loan facility. The declaration was made as pressure on the bank’s liquidity mounted, along with that of other local banks, as a result of SVB Financial Group’s banking division going into receivership on Friday.
First Republic is an America-based bank and wealth management firm that offers trust, personal banking, and business banking services to low-risk, high-net-worth clients and places a strong emphasis on offering individualized customer care.
SVB’s Collapse: Western Alliance Bank Shares Dropped
As smaller lenders are under pressure following the collapse of Silicon Valley Bank, shares of Western Alliance Bancorp dropped by 47%.
Attempts were made to ease investors’ worry that other banks would have the same issues that SVB had, but the performance was still bas. After crypto-currency-friendly bank silver gates voluntary closure on Sunday, Signature Bank became the third lender to close its doors in a week.
As the shares dropped and SVB’s collapse adversely affected the bank, Western Alliance will be under Moody’s review for a downgrade.
Intrust Financial Corporation Shares Slides After SVBs Failure
Intrust Financial Corporation is a financial service business that has its headquarters in Wichita, Kansas, and the United States. Moody’s has placed Intrust Financial Corporation subsidiary banks on review for downgrading.
The downgrade evaluation takes into account the incredibly unstable funding conditions for some US banks that are susceptible to the possibility of uninsured deposit flows. The analysis will concentrate on the bank’s fluctuations in deposit quantities since the year’s beginning as well as the future stickiness of its deposits.
UMB Financial Corp & Zions Bancorp: Shares Plunged After SVBs Collapse
Zions Bankcorp and UMB Financial Corp are two financial institutions in the US that are going to be reviewed by Moody’s as a result of the downfall of Silicon Valley Bank.
When the failure of Silicon Valley Bank sent shockwaves across the financial sector, UMB Bank’s stock price plummeted on Monday. UMB Financial Corp claims to have the biggest local market share of any regional or national bank in the metro area when the entire amount of depositors is taken into account.
It was among several regional banks around the nation that experienced dramatic drops in stock prices, despite efforts by the federal government to increase public trust in the US banking sector.
As UMB financial corporation, Zions Bancorp was also going downgraded by Moody’s. Zion’s spokesperson has claimed that their share had plunged due to the fall of SVb, but they are confident enough to come back to where it was earlier.
Comerica Inc stock drops 28% after SVB Collapse
On Monday, the share of Dallas-based Comerica Bank dropped to $42.61, a loss of 28% for the day. By Friday’s market close, shares were selling for %58.81. But earlier in the day, regulators closed Silicon Valley Bank, making it the biggest bank failure since the Great Recession.
At the end of 2022, Comerica had $16.4 billion in commercial real estate loans on its books or 31% of the bank’s total loan volume. The bank expanded its lending to real estate developers specifically by $1.5 billion last year. In addition to funding commercial real estate, Comerica had residential mortgage loans totaling $258 million.
Read More: Did Peter Thiel Byrne Hobart’s Newsletter Spark Bank Run That Led To SVB Collapse?
