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PacWest Bancorp
PACW,
shares tumbled 37% in premarket trade on Thursday, taking other bank stocks with it after a report that the company’s executives were weighing a possible sale.
The report, from Bloomberg News, adds to the concerns over the financial stability of regional banks, following the collapse in March of Silicon Valley Bank and Signature Bank, and the sale of First Republic Bank to JPMorgan Chase & Co.
JPM,
this week. PacWest’s shares have been diving this week in the wake of First Republic’s collapse.
Bloomberg reported Wednesday afternoon that PacWest’s leaders were considering strategic alternatives of their own, which could include a sale.
The report, based on anonymous sources, also said that the bank has not found much interest in an acquisition of the entire company, and could look to break it apart or raise fresh capital. Bloomberg also said that any buyer could risk a hefty loss due to loan markdowns.
The company, which is based in Los Angeles and owns Pacific Western Bank, issued a statement saying it had already announced it was exploring strategic asset sales and that the company and its board “continuously review strategic options.” It said it’s been approached by several potential partners and investors.
First Republic and Silicon Valley Bank are based in the San Francisco Bay Area.
Shares of PacWest plunged in after-hours trade, and in premarket trade were down 39%. Pacific Western Bank has 67 branches in California, with one in Denver and one in Durham, N.C.
Shares of other regional banks also saw pressure in premarket trade. Among the more active stocks ahead of Thursday’s open, Western Alliance Bancorp’s
WAL,
tumbled 19% and Zions Bancorp NA’s
ZION,
dropped 9.5%.
Western Alliance tried to reassure investors, by saying late Wednesday by saying the bank was sound and stable, and that it saw no unusual deposit flows since the sale of First Republic.
“Total deposits were $48.8 billion as of Tuesday, May 2, up from $48.2 billion as of Monday, May 1, and flat to Friday, April 28,” the bank said in a statement. “Quarter to date, deposits are up $1.2 billion from $47.6 billion as of March 31.”
Following Silicon Valley Bank’s collapse — brought on by a bank run after higher interest rates constrained tech-industry funding and lowered the value of that bank’s bond investments — concerns have grown about banks that catered to a wealthier clientele. The money in those customers’ accounts is likelier to be above federally insured limits, and those customers were seen as likely to stash their money elsewhere, for more safety or greater returns.
But the move sharp move lower for PacWest’s stock follows more upbeat comments from the bank’s management last month, after investors worried that the bank run that sank SVB could prompt panicked consumers to pull their money from other banks.
After the Bloomberg report, PacWest said it has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news, and that as of May 2, it had total deposits of $28 billion — which is what it reported for the end of the first quarter.
The big hits to some bank stocks on Wednesday came as the Federal Reserve yet again raised its key interest rate, as it tries to engineer a slowdown in the economy to lower prices.
At the close of regular trading on Wednesday, shares of PacWest were down 72% year to date. By comparison, the S&P 500 Index
SPX,
is up 6.5% in 2023.
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