First Republic Bank’s debt was cut to junk by Moody’s

The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term given its increasing reliance on short-term and more expensive wholesale funding driven by deposit outflows,” analysts at Moody’s said in a press release.

They cited various recent developments at First Republic, including the company’s disclosure Thursday that its borrowings from the Federal Reserve ranged from $20 billion to $109 billion last week. Also on Thursday, the bank received a $30 billion cash injection from 11 major U.S. banks.

“Moody’s believes that the high cost of these loans, combined with the bank’s high proportion of fixed income assets, is likely to have a major negative impact on First Republic’s core profitability in the coming quarters,” the analysts said. “Furthermore, the rating agency noted that while news about the banking syndicate’s deposits is positive in the near term, the bank’s long-term path back to sustainable profitability remains uncertain.”

First Republic is reportedly trying to raise money from other banks or private equity firms by selling additional shares. according to the New York Times.

Shares of the company are down 80% since the close on March 8, just before the Silicon Valley bank spooked investors with an update on its business and a planned stock sale. First Republic fell 33% in Friday’s session despite the deposit agreement with the big banks. Shares fell another 6% in Friday’s extended session.

Moody’s announced that the outlook would remain at “Rating under Review”. This downgrade review, it said, “reflects the ongoing challenges to the bank’s medium-term credit profile given its significantly eroded deposit base, increasing reliance on short-term wholesale financing and the significant volume of unrealized losses on its investment securities.”