Shares of First Republic Bank tumbled toward a record low Monday, after the troubled bank had its credit rating slashed deeper into “junk” territory over at S&P Global Ratings. The stock
FRC,
-32.80%
dropped 20.0% in premarket trading, putting it on track to open below the Oct. 3, 2011 record low close of $22.48.
S&P on Sunday cut First Republic Bank’s long-term issuer rating by three notches, to B+ from BB+, saying the $30 billion rescue package the bank received last week doesn’t solve the bank’s liquidity problems. “The $30 billion in deposits that First Republic reported it will receive from 11 large U.S. banks should ease near-term liquidity pressures, but it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing,” S&P said. The stock rose 10.0% last Thursday after the $30 billion in deposits received was announced, but then plunged 32.8% on Friday. The bank’s rating remains on “CreditWatch negative,” with S&P warning the rating could be downgraded further if the bank is unable to demonstrate some progress in stabilizing deposits. “Based on the company’s public disclosure on March 16 that secured borrowings from the Federal Reserve have ranged from $20 billion to $109 billion and borrowings from the Federal Home Loan Bank increased by $10 billion over the last week, we think that the outstanding balance of secured borrowings has likely increased significantly to fund sharp deposit outflows that had occurred,” S&P said. The downgrade on Sunday comes just four days after S&P cut the rating by four notches to BB+, the first speculative grade, or “junk” rating, from A-. A “B” rating at S …