PacWest tumbles on weighing options, other U.S. regional bank stocks fall
2023.05.04 05:38
© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 3, 2023. REUTERS/Brendan McDermid
(Reuters) – Shares of U.S. regional banks fell premarket on Thursday, hurt by a 37% slump in PacWest Bancorp after its announcement about exploring strategic options spurred market concerns of a worsening banking crisis.
Western Alliance (NYSE:) Bancorp shares slumped 17% despite an attempt to reassure investors that it had not experienced unusual deposit outflows following the sale of collapsed lender First Republic Bank (NYSE:) to JPMorgan Chase & Co (NYSE:) on Monday.
Zion Bancorporation, KeyCorp (NYSE:), Valley National Bancorp (NASDAQ:), Comerica (NYSE:) and First Horizon (NYSE:) dropped between 2% and 6%. The SPDR S&P Regional Banking (NYSE:) ETF shed 2.8%.
Reuters reported on Wednesday that Los Angeles-based PacWest was exploring strategic options including a potential sale or capital raising, after a liquidity boost announced in March failed to inspire confidence in its ailing share price.
“Investors are worried that it (PacWest) will be the next domino to fall as worries swirl about deposit flight and the lack of asset diversification among smaller lenders,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The slide in shares of PacWest and its peers highlights uncertainty around the health of regional banks despite regulatory efforts to call an end to the banking crisis that started with the collapse of Silicon Valley Bank and Signature Bank (OTC:) in March.
U.S. Federal Reserve Chair Jerome Powell on Wednesday reiterated the country’s banking system remains resilient despite “strains” in March after the central bank delivered a 25-basis rate hike.
PacWest Bancorp reported a loss of $1.1 billion attributed to shareholders for the first quarter of the year.
