S&P downgrades First Republic further into junk status as the bank's $30 billion rescue may not be enough to solve liquidity problems

• First Republic Bank's credit rating was cut for the second time in less than a week by S&P Global Ratings.
• The downgrade came as the regional lender appeared to be under "high liquidity stress" from deposit withdrawals.
• On Monday, the WSJ reported banks are in talks to provide more aid to First Republic.

First Republic Bank's credit rating was downgraded further into junk status by S&P Global Ratings, with the ratings action arriving despite the $30 billion rescue plan crafted for the lender by rival banks.

Shares of First Republic sank after the second S&P credit downgrade in less than a week, among the reverberations from this month's collapse of Silicon Valley Bank after a $1.8 billion bond-related loss kicked off a stampede of withdrawals at that bank.

The stock crashed even further following a report from The Wall Street Journal that JPMorgan CEO Jamie Dimon was leading talks among big banks to provide even more aid to stabilize First Republic. Shares crashed as much as 50% before paring losses. The stock has lost 85% of its value this month.

First Republic over the past week "was likely under high liquidity stress with substantial deposit outflows," based in part by the deposit plan by 11 large US banks, S&P Global analysts Nicholas Wetzel and Rian Pressman wrote Sunday.

They cut the First Republic's long-term issuer credit rating to B+ from BB+, and warned, in keeping its ratings on negative credit watch, that another downgrade may occur.

Last week, Fitch Ratings and Moody's also downgraded First Republic.

First Republic's disclosure of $20 billion to $109 billion in borrowings from the Federal Reserve, an increase by $10 billion in borrowings from the Federal Home Loan Bank, and the bank's dividend suspension also served as signs of liquidity stress, S&P Global said. The Federal Home Loan Bank System provides cash to banks and other lenders and is made up of 11 regional banks.

S&P Global noted First Republic last week reported a cash position of $34 billion, not including the $30 billion in deposits from the 11 banks.

The infusion of deposits should ease its near-term liquidity pressures. However, "it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing," Wetzel and Pressman wrote.

First Republic said last week the package strengthened its liquidity position and served as "a vote of confidence for First Republic and the entire US banking system."

Meanwhile, shares of PacWest and Western Alliance Bancorp were mixed Monday after weekend updates from those regional lenders. PacWest said it "continues to have solid liquidity," with more than $10.8 billion in available cash, and that cash exceeds total uninsured deposits.

Western Alliance said it remains in a strong position, with immediately available liquidity of over $20 billion as of March 16.

PacWest was up 9% and Western Alliance turned down to trade nearly 5% lower.