“The bank did not see unusual inflows of deposits following the sale of First Republic Bank and other news,” Baquist said.
Backwest Bancorp (PACW) – Get a free reportShares collapsed on Thursday after the Los Angeles-based bank said it was considering a range of strategic alternatives, including selling outright, just weeks after touting its improved deposit base to investors.
Bloomberg first reported that PacWest had considered raising fresh capital to bolster its balance sheet, or spinning off the Pacific Western Bank franchise from its other consumer and commercial lending businesses. The bank confirmed that strategy late Wednesday, saying it was in talks with potential partners.
PacWest canceled plans to raise capital in March as bank stocks slumped in the wake of the Silicon Valley bank collapse, and it noted on Wednesday that 75% of its total $28 billion deposit base had fallen under the FDIC protection threshold.
“The bank did not experience unusual deposit inflows following the sale of First Republic Bank and other news,” Baquist said in a statement late Wednesday. Our cash available remains strong and has outpaced uninsured deposits.
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“At the beginning of the year, the company announced a new strategic plan aimed at maximizing shareholder value by focusing on various components and improving our operational efficiency,” said Baquist. “We have implemented this strategy and accelerated many of these targets in response to recent market volatility in the banking industry.”
Shares of PacWest were flagged 36.8% lower in pre-market trading to indicate an opening bell price of $4.06 per share, a level that would value the bank at just $463 million.
Other regional lenders also came under pressure on Thursday with the Western alliance (WAL) – Get a free reportDown 19.1% and Zion Bancorp (Zion) – Get a free reportdown 7.3%.
The KBW Regional Banking Index closed 1.9% lower overnight at a fresh two-year low of 74.82 earlier in the session, consolidating its 2023 decline of around 25.8%.
The Federal Reserve has acknowledged the growing risks in the banking sector, following the failure of the Silicon Valley bank and the closure of the signature bank in early March, as well as the sale of the First Republic. (FRC) – Get a free reportto JPMorgan (JPM) – Get a free reportearlier this week, but he insisted the system was “sound and resilient” as he made his tenth consecutive rate hike yesterday in Washington.
The sale of First Republic marked the second failure for a US bank in as many months after the collapse of SVB Financial and the closure of Signature Bank in early March. The move saw JPMorgan bid on PNC Financial (PNC) – Get a free reportand Citizens Financial (CFG) – Get a free reportFor the bank’s loan book and wealth manager of $173 billion and its deposits of $92 billion.
“There were three big banks, really from the start, that were at the heart of the stress that we saw in early March — a period of intense stress. All those issues are now resolved, and all depositors are protected,” Powell said, adding that the sale of First Republic “paints A kind of line” under the pressure period of regional banks.
However, the transaction did not include First Republic’s debt nor its preferred or common stock, and the valuation of the loan book may trigger market-level adjustments in other regional banks.
The Federal Deposit Insurance Corporation also took a $13 billion hit from the sale, which it arranged along with the California Department of Financial Protection and Innovation late Sunday.
said Rob Clary, London-based investment analyst at wealth manager firm Evelyn Partners.
He added, “But the risks in the US from tightening monetary policy are becoming clear.” “The March failures of Silicon Valley Bank and Signature Bank exposed the fragility of the US banking system, and the collapse of the First Republic this week exacerbated those concerns.”