PacWest leads losses in regional bank stocks
May 9 (Reuters) - Shares of PacWest Bancorp (PACW.O) led declines in U.S. regional lenders at market open on Tuesday as investors feared the ongoing banking crisis could deepen.
PacWest dropped 5% in early trading, a day after the Los Angeles-based lender's decision to cut its quarterly dividend failed to stem worries about its financial stability.
The KBW Regional Banking Index (.KRX) fell 0.7% after the index hit a 30-month low last week in the wake of the collapse of First Republic Bank and PacWest's decision to explore strategic options.
PacWest and Western Alliance, which have been at the heart of the sell-off in regional banks, saw the steepest decline in deposits in the first quarter after First Republic, according to S&P Global Market Intelligence data.
"The ones that have been hit the hardest are the ones that continue to see the most amount of stress," said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.
"If banks want to get their stock prices back up, if they want to remain solvent, they have to make sure that any new loans they make are of high credit quality so that they don't worsen their position."
Adding to the banking woes, U.S. firms of all sizes were showing less demand for credit than three months ago, according to a Federal Reserve survey, among the first measures of sentiment across the sector since the recent run of bank failures.
The tightening credit conditions for U.S. business and households in the first quarter, however, was likely due to the impact of higher interest rates than the cliff-like decline in credit some feared after the March collapse of Silicon Valley Bank, Fed's quarterly survey showed.
"We do expect some credit erosion as the year progresses, but we also believe the banks have visibility into the outlook and can manage any credit stresses that emerge," said Jon Arfstrom, analyst at RBC Capital Markets in a note.
Western Alliance (WAL.N) dropped 3.1%, while First Horizon Corp (FHN.N) and Zion Bancorp (ZION.O) dipped 2.3% and 0.1%, respectively, with Arfstrom noting that the pullback in banks shares overall have made their valuations attractive.
Wall Street executives and bank analysts last week called on regulators to quickly provide more protection for bank deposits and consider other backstops, arguing only an intervention could stop the crisis.
Reporting by Medha Singh in Bengaluru, additional reporting by Bansari Mayur Kamdar; Editing by Arun Koyyur
Our Standards: The Thomson Reuters Trust Principles.
Source: Reuters
