Los Angeles-based bank holding company PacWest Bancorp is exploring strategic options including a sale or capital raising, fuelling concerns about a possible collapse. This sent shares of the bank as well as of several other US regional lenders, including Western Alliance Bancorp tumbling.
According to a report in Reuters, PacWest is hoping to avoid the fate of other regional lenders that were taken over by US regulators in the last two months. It aims to proactively find a solution that bolsters its finances, the agency said quoting sources.
PacWest, that has branches in California as well as Durham, North Carolina and Denver, Colorado, had raised $1.4 billion from investment firm Atlas SP Partners in late March.
Western Alliance subsequently said that it had not experienced any unusual deposit flows and had adequate liquidity. It said it was "reaffirming its financial strength as well as its deposit growth guidance in response to recent industry events."
PacWest shares fell 52 per cent and Western Alliance saw a decline of 23 per cent. Other regional lenders under pressure also fell, including Zion Bancorp, Comerica, and First Horizon, all of which fell 7 per cent. PacWest stock lost almost 90 per cent of its value since the banking crisis started on March 8.
This development comes amid the US regional banking crisis that started with the collapse of Silicon Valley Bank and Signature Bank in March. In March, the abrupt closure of Silicon Valley Bank, led by a social media-driven run, started off a regional bank crisis, leading regulators to step in with emergency measures.
Last week, First Republic Bank, which was swept up in the bank run failed and was sold to JPMorgan Chase in an auction by the Federal Deposit Insurance Corp (FDIC).
Meanwhile, the Federal Reserve raised interest rates by 25 bps, and signaled it may pause further increases, giving officials time to assess bank failures and to cool down persistently high inflation.
Also read: JPMorgan to acquire First Republic’s assets as US regulators intervene