The recovery of the regional bank stalls on Monday


Global Courant 2023-05-08 20:52:31

A branch of Pacific Western Bank in Encino, California, on Saturday, April 22, 2023.

Morgan Liebermann| Bloomberg | Getty Images

PacWest Bancorp returned most of an early rally on Monday as the recovery for regional bank stocks appeared to lose some momentum.

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Shares of PacWest were up about 5% on Monday, returning nearly 82% on Friday. The company announced a dividend cut late Friday night from 25 cents per share in the prior quarter to just 1 cent per share. PacWest CEO Paul Taylor assured investors that the bank’s business remains “fundamentally sound.”

“Given the current economic uncertainty, recent volatility in the banking sector and possible changes in regulatory capital requirements, we view cutting the dividend as a prudent move to accelerate our plans to build capital,” Taylor said in a press release.

The stock opened nearly 30%, but gains faded in morning trading.

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Pac West

Other regional banks also coughed up early profits. Western Alliance and Zions Bancorp were both slightly up, but well off their session highs. The SPDR S&P Regional Banking ETF (KRE) fell 1.4%.

Concerns about regional banks lingered after regulators seized First Republic last week, resulting in the third bankruptcy of a US bank since early March. A rapid rise in interest rates has weighed on banks with long-term bonds, causing a deposit flight. Institutions with a high share of uninsured deposits were particularly vulnerable as customers feared they would lose their savings in a bank run.

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Regional Banking ETF 1 day

PacWest said last Wednesday it was exploring “all options,” confirming it was in talks with several potential partners and investors. The California-based bank said it had not experienced “extraordinary deposit flows” following the First Republic collapse.

Shares of PacWest are down more than 40% in May and 75% for the year through Friday. The SPDR Regional Banking ETF was down 10% in May and 35% for the year through Friday.

Concerns persisted despite comments last week from JPMorgan Chase CEO Jamie Dimon and Federal Reserve Chairman Jerome Powell that the first phase of the regional banking crisis was over.

The fight for regional banks has led some Wall Street pros and former regulators to call for changes to support the industry. The ideas include expanding the scope of deposit insurance or instituting a ban on short-selling bank stocks, though regulators have shown no signs that either proposal is close to being implemented.

Correction: PacWest Bancorp led another relief meeting at regional banks on Monday. In an earlier version, the name of the bank was misspelled.

The recovery of the regional bank stalls on Monday

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