Bloomberg report comes after the bank last month said deposits had ‘stabilized’; Zions, Western Alliance also hit hard after hours
PacWest Bancorp (PACW) shares tumbled more than 50% in after-hours trading Wednesday, 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, did not immediately respond to a request for comment. First Republic and Silicon Valley Bank are based in the San Francisco Bay Area.
Shares of PacWest plunged 53% in after-hours trade on Wednesday. Pacific Western Bank has 67 branches in California, with one in Denver and one in Durham, N.C.
The sudden decline in Wednesday’s extended session wrapped in other banks’ stocks, including Western Alliance Bancorp (WAL) and Zions Bancorp NA (ZION). Shares of those banks were down 23% and 9%, respectively, in extended trading.
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.
“Our strong banking franchise and our loyal, diversified customer base have driven us through one of the most challenging recent periods in the banking industry,” PacWest Chief Executive Paul Taylor said in the company’s earnings release last month.
“Our deposits have stabilized with total insured deposits increasing from 48% of total deposits at year-end to 71% of total deposits at March 31, 2023,” he continued. “Importantly, deposits stabilized in the latter part of March and rebounded nicely in April, increasing approximately $700 million subsequent to quarter-end.”
PacWest finished the first quarter with total deposits of $28.2 billion.
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 is up 6.5% in 2023.