July 13, 2024

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PacWest is making gains in the volatile trading of US regional banks

PacWest is making gains in the volatile trading of US regional banks

(Reuters) – Shares of Baquest Bancorp (PACW.O) regained the previous session’s losses on Tuesday as investor uncertainty about the financial condition of US regional banks fueled volatile trading in its shares.

PacWest rose 2.3% after losing as much as 10% earlier in the day following a decision by the Los Angeles-based bank to cut its quarterly dividend in an effort to boost liquidity.

The bank’s stock is up more than 92% in the past three sessions after a surprise sell-off pushed it to a record low last week.

“We think BaQuest and the other banks have not been trading on their fundamentals,” said Piper Sandler analyst Matthew Clarke, who currently has an “overweight” rating on BaQuest shares.

Other regional bank stocks were also volatile. Western Alliance (WAL.N) fell 1.4%, Valley National Bancorp (VLY.O) lost 1.5%, First Horizon Corp (FHN.N) fell 1.3%, and Synovus Financial Corp (SNV.N) fell nearly 1%. . But Comerica Inc (CMA.N) and Zion Bancorp (ZION.O) rose 0.39% and 0.66%, respectively.

The KBW Banking Regional Index (.KRX) fell 0.72% on Tuesday and was hovering near a 30-month low last week after the collapse of First Republic Bank and PacWest’s decision to explore strategic options.

“The volatility is back again,” says analysts Piper Sandler, led by Scott Sievers. “We had hoped that (First Republic’s) decision would return some calm and coolness to the market. Instead, it only seemed to re-intensify the wild price swings.” , in a note to investors.

New York Federal Reserve Chairman John Williams said on Tuesday that the US banking system remains healthy and resilient, and that the acute phase of the current crisis is likely over, with problems confined to a few banks.

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Williams also said the Fed is looking to end the cycle of interest rate hikes as inflation pressures have eased a bit and tighter financial conditions linked to banking sector woes are expected to help further cool the economy.

PacWest and Western Alliance, which have been at the center of recent sell-offs at regional banks, saw the largest drop in deposits in the first quarter after First Republic Bank, according to data from S&P Global Market Intelligence.

Analysts have called for the Federal Deposit Insurance Corporation (FDIC), which currently insures $250,000 in deposits per person per bank, to increase deposit coverage to end the current crisis with regional banks. The FDIC released a report last week, saying it sees benefits in increased subsidies for business accounts.

“The FDIC needs to raise its limits because this will instill confidence in people and prevent them from diverting their money to larger banks,” said Michael Ashley Schulman, chief investment officer at Running Point Capital in California. “Otherwise the smaller banks will be destroyed.”

(Reporting by Medha Singh in Bengaluru), Additional reporting by Bansari Mayur Kamdar; Editing by Aaron Kuyor

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