June 9, 2023

Brighton Journal

Complete News World

PacWest stock drops to a new low. Western Alliance and shares of other regional banks followed.

Backwest Bancorp stock fell nearly 42% to a new low before trading halted on Thursday, prompting another day of selling in regional bank stocks as investors tried to weigh the latest news from smaller companies.

And on Wednesday evening, Pacoist (stock symbol: PACW) said in a statement that its deposits were on the rise. “Core customer deposits have increased since March 31, 2023, totaling $28 billion as of May 2, 2023, with total insured deposits at 75% versus 71% at the end of the quarter and 73% as of April 24, 2023,” PacWest said. in a statement.

Shares of Beverly Hills, California, are down 37% since JPMorgan Chase stepped in to acquire First Republic, another struggling regional bank, on Monday. PacWest’s statement followed another drop in the bank’s share price by as much as 55% in after-hours trading after Bloomberg News reported that the bank was weighing strategic options, including selling.

If PacWest stock closes at those levels, it would be the biggest percentage drop ever and a percentage low for the shares, according to market data from Dow Jones.

Bacquest said it is in discussions with partners and investors and that talks are ongoing.

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Recently, the company has been approached by several potential partners and investors – and discussions are ongoing. The company will continue to evaluate all options to maximize shareholder value, the lender said.

In addition, the company has paid off $1 billion in loans with its cash surplus and said its cash and liquidity remains strong and exceeded its unsecured deposits, which were 188% as of May 2.

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Backwest is one of the banks that has been under the most stress since the Silicon Valley collapse. Since then, banks with high levels of uninsured deposits or subprime loan books have seen deposits scramble.

DA Davidson analyst Gary Tenner said PacWest stock “isn’t trading on fundamentals, given market concerns.” He downgraded the stock’s rating to neutral from buy. RBC Capital Markets analysts were more optimistic, maintaining their Outperform rating after PacWest’s update, which they described as “helpful”.

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Other regional bank shares also fell on Thursday. On top of concerns about PacWest, banks responded to news that the Federal Reserve raised interest rates for the 10th time this cycle on Wednesday. Higher interest rates put pressure on banks by increasing borrowing costs, which can put pressure on customers and limit the number of people applying for loans.

The SPRD S&P Regional Banking Exchange Traded Fund (KRE) fell 4.9% Thursday and was on track to post its lowest close since October 2020. S&P 500 Index

By comparison, it was down 0.3%.

Western Alliance Bancorp (WAL), down 16%, also issued a statement on Wednesday, saying it had not seen unusual deposit inflows in recent days and that its capital base remained strong. Its shares fell 4.4 percent on Wednesday.

Comerica (CMA) declined 6.7%, Valley National

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(VLY) decreased 5.9%. Both shares sold off earlier in the week.

Activist investor Bill Ackman has called for a systemwide implementation of the Deposit Guarantee, adding, “We are running out of time to fix this problem.”

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“How many more unnecessary bank failures do we need to watch before the FDIC, the US Treasury and our government wake up?” he said on Twitter late on Wednesday. “Trust in a financial institution is built over decades and destroyed in days. With each domino falling, the next weaker bank begins to waver,” Ackman said.

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Ackman was not alone in expressing this belief. UBS analyst Erica Najarian wrote in a research note Thursday that the change in deposit insurance “should be taken into account.”

“In order to stop the relay before the market actually causes more bank failures, we wonder if it’s time to ramp up the Treasury and the Federal Reserve and maybe create some kind of support via an Exchange Stabilization Fund (ESF)—at least until the Act can,” Najarian said. Congress permanently changing deposit limits.

Write to Angela Palumbo at angela[email protected] and Brian Swint at [email protected]