PacWest Bank shares fall more than 50% on report that it could be the next regional bank to collapse
New York CNN —
Shares of PacWest Bank were cut in half in after-hours trading after Bloomberg reported that the regional bank swept up in the recent crisis is exploring strategic options, including a sale.
“Exploring strategic options” is Wall Street lingo for “please help.” The last bank to announce it was exploring strategic options was First Republic Bank. That regional bank failed Monday, and JPMorgan purchased most of its assets.
PacWest Bank did not immediately respond to CNN’s request for comment.
Bloomberg, citing anonymous sources, said the bank has been looking to sell itself, but bidders aren’t coming out of the woodwork. PacWest Bank is reportedly considering splitting up the company or trying to raise capital to support itself, Bloomberg reported.
Like many other regional banks, the value of PacWest’s loans and bond holdings have crumbled as interest rates have surged. Customers yanked their deposits in March out of fear that the bank could fail and they’d be left holding the bag. Although the Federal Deposit Insurance Corp. insures accounts holding up to $250,000, many businesses have a lot more money in their accounts, much of which is uninsured.
That left the bank and its competitors with a potential problem: If customers kept drawing down their accounts, the bank may run out of cash to pay them. That made investors nervous: PacWest’s stock has plunged 72% this year.
PacWest appeared to have stabilized in recent weeks since the March collapses of Silicon Valley Bank and Signature Bank. PacWest reported last week that customers have stopped withdrawing their money and 73% of the bank’s deposits were insured.
But when First Republic failed earlier this week, investors grew weary that another shoe could drop. The stock cratered 28% on Tuesday and another 2% Wednesday.
Other regional banks also tumbled in after-hours trading, including Western Alliance, which fell by nearly 30%.
Source: CNN
