New Phase of Banking Crisis Pits Fear Against Fundamentals
A cluster of regional banks scrambled on Thursday to convince the public of their financial soundness, even as their stock prices plunged and investors took bets on which might be the next to fall.
The tumult brought questions about the future of the lenders to the fore, suggesting a new phase in the crisis that began two months ago with the collapse of Silicon Valley Bank and Signature Bank, and was punctuated on Monday by the seizure and sale of First Republic Bank.
PacWest and Western Alliance were in the eye of the storm, despite the companies’ protestations that their finances were solid. PacWest’s shares lost 50 percent of their value on Thursday and Western Alliance fell 38 percent. Other midsize banks, including Zions and Comerica, also posted double-digit percentage declines.
Unlike the banks that failed after depositors rushed to pull their money out, the lenders now under pressure have reported relatively stable deposit bases and don’t sit on mountains of soured loans. They are also much smaller than Silicon Valley Bank and First Republic, which each had about $200 billion in assets when they collapsed. PacWest, based in Los Angeles, has about $40 billion in assets, and Western Alliance, with headquarters in Phoenix, has $65 billion in assets. Both banks run fewer than 100 branches.
Source: The New York Times
