First Republic Bank: expected rebound after its downgrading by S&P Global – 03/21/2023 at 14:07

(AOF) – The regional bank First Republic is expected to rise some 17% at the opening of Wall Street after collapsing 47% yesterday, to an all-time low of 12.18 dollars. This fall is the consequence of S&P Global’s decision to downgrade the bank’s credit rating to junk grade, warning that the recent injection of $30 billion in deposits by 11 major banks could not not solve its liquidity problems.


The negative effects of rising interest rates

The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects an average increase of 18% in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.

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