Overview
- On May 1, 2023, the California Department of Financial Protection and Innovation announced that it took possession of First Republic Bank and appointed the FDIC as receiver.
- JPMorgan Chase & Co. subsequently purchased the deposits and substantially all the assets of First Republic from the FDIC, without assuming any of First Republic's corporate debt or preferred stock and assuming only a portion of First Republic's secured borrowings.
- Since JPMorgan assumed the substantial majority of First Republic's assets, we view it as a virtual certainty that First Republic will default on any remaining senior financial obligations given what we assume would be an insufficient remaining asset base.
- We lowered our issuer credit rating on First Republic Bank to 'CC' and preferred stock and subordinated debt issue-level ratings to 'D' and subsequently withdrew them.
- At the time of the withdrawal, the issuer credit rating remained on CreditWatch with negative implications since we expect default to be a virtual certainty.
Rating Action
On May 2, 2023, S&P Global Ratings lowered its issuer credit rating on First Republic Bank to 'CC' from 'B+'. In addition, we lowered our issue credit ratings on First Republic Bank's subordinated debt to 'D' from 'B-' and outstanding issues of preferred stock to 'D' from 'C'. The issuer credit rating remains on CreditWatch with negative implications.
Subsequent to the downgrades, we withdrew the issuer credit rating on First Republic Bank and issue ratings on its subordinated debt and its outstanding preferred stock. At the same time, we withdrew legacy issue ratings on previously redeemed preferred stock.
Rationale
We lowered our issuer credit rating on First Republic Bank to 'CC' following the California Department of Financial Protection and Innovation's May 1 announcement that it took possession of the bank and appointed the Federal Deposit Insurance Corp. (FDIC) as receiver. Following the closing of the bank, the FDIC sold substantially all of First Republic's assets and deposits to JPMorgan Chase & Co. JPMorgan did not assume any of First Republic's corporate debt or preferred stock and assumed only a portion of its secured borrowings. Given that First Republic is in receivership and JPMorgan has assumed the vast majority of its assets, we think it's a virtual certainty that First Republic will default on any remaining senior financial obligations given what we assume would be an insufficient remaining asset base.
We also lowered our issue credit ratings on First Republic's subordinated debt and preferred stock to 'D'.
Environmental, Social, And Governance
ESG credit indicators: To N/A, N/A, N/A; From: E-2, S-2, G-4
Related Criteria
- General Criteria: Hybrid Capital: Methodology And Assumptions , March 2, 2022
- Criteria | Financial Institutions | General: Financial Institutions Rating Methodology , Dec. 9, 2021
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions , Dec. 9, 2021
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings , Oct. 10, 2021
- General Criteria: Group Rating Methodology , July 1, 2019
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology , July 20, 2017
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings , Oct. 1, 2012
- General Criteria: Principles Of Credit Ratings , Feb. 16, 2011
Related Research
- First Republic Bank Downgraded To 'B+' Despite Support Received; Rating Remains On CreditWatch Negative, March 19, 2023
- First Republic Bank Downgraded To 'BB+' From 'A-' On Funding Profile Risk; Ratings On CreditWatch Negative, March 15, 2023
- First Republic Bank ‘A-‘ Rating Placed On CreditWatch Negative On Funding Profile Risk, March 14, 2023
Ratings List
Downgraded | ||
---|---|---|
To | From | |
First Republic Bank |
||
Subordinated | D | B-/Watch Neg |
Preferred Stock | D | C/Watch Neg |
Downgraded | ||
To | From | |
First Republic Bank |
||
Issuer Credit Rating | CC/Watch Neg/NR | B+/Watch Neg/NR |
Ratings Withdrawn | ||
To | From | |
First Republic Bank |
||
Preferred Stock | NR | CCC/Watch Neg |
Preferred Stock | NR | D |
Subordinated | NR | D |
Issuer Credit Rating | NR/NR | CC/Watch Neg/NR |
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
Primary Credit Analyst: | Nicholas J Wetzel, CFA, Englewood + 303-721-4448; nicholas.wetzel@spglobal.com |
Secondary Contact: | Rian M Pressman, CFA, New York + 1 (212) 438 2574; rian.pressman@spglobal.com |
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