Global Courant 2023-05-11 22:04:20
Shares of PacWest Bancorp plunged more than 20% in early trading on Thursday after the regional lender said last week it faced a significant withdrawal of deposits, renewing concerns about financial problems in the wake of a series of major bank collapses .
The sharp fall in PacWest shares caused a pause in trading in the company’s stock minutes after the market opened Thursday morning, but trading later resumed.
Pac West said in a securities filing on Thursday that the bank lost 9.5% of deposits last week, marking a reversal after the company said deposits remained stable early this month.
Noting the deposit flight, PacWest said it was holding $15 billion in readily available cash as of Wednesday if needed to make further withdrawals. The liquidity far exceeds total uninsured deposits, which amount to $5.2 billion, the bank said.
PacWest did not immediately respond to ABC News’ request for comment on the stock drop.
The Los Angeles-based medium-sized lender said last week that it is exploring “all options” as it weighs offers from potential investors, as well as the sale of a $2.7 billion loan portfolio.
In the statement last week, the company dismissed concerns about a sudden run on deposits, saying it had “experienced no extraordinary deposit flows” following the seizure and sale of First Republic two days earlier.
The significant withdrawal of deposits mostly occurred in the days following last week’s announcement, PacWest said Thursday.
Overall, PacWest stock is down more than 80% this year, wiping out hundreds of millions of dollars in value.
A branch of the Pacific Western Bank is seen on March 10, 2023 in Los Angeles.
Eric Thayer/Bloomberg via Getty Images
PacWest’s financial troubles follow the collapse within weeks of three of the country’s 30 largest banks.
As the Fed raised interest rates aggressively over the past year, the value of long-term government bonds and mortgage bonds fell, leaving a hole in the balance sheets of some regional banks.
The bankruptcy of Silicon Valley Bank in March sent a shock wave through the financial system that helped bring down New York City-based Signature Bank days later. Last Monday, First Republic fell under government control before being sold to JPMorgan Chase.
While high interest rates contributed to the collapse, all banks also retained a significant portion of uninsured savers, who tend to panic without a government safety net for their money.
Responding to concerns about deposits not enjoying government protection, PacWest said last week that insured deposits make up 75% of its holdings, a sharp increase from late last year when only 48% of its deposits were insured.
Share prices of some other regional banks held steady or rose during early trading on Thursday, suggesting the financial fallout was limited to PacWest. Shares of Phoenix-based Western Alliance Bancorp were up about 5%; while Salt Lake City-based Zions Bancorp fell less than 1%.
