Regional lender PacWest Bankcorp has confirmed it is in talks with potential partners and investors as it explores strategic options to maximize shareholder value, following a stock rout which saw its share price fall 60%, that culminated in its trading being halted, along with another bank’s stock. This makes it the latest American bank to become swept up in the largest crisis in the American banking sector since 2008.
After hours, the bank’s stock nosedived on Wednesday, after reports circulated that the Los Angeles-based lender was exploring a sale. By early trading Thursday, the lender’s shares had fallen as much as 48% in early trading. Later in the day, regulators stepped in to halt trading in the Los Angeles-based PacWest as well as Arizona’s Western Alliance following the dramatic collapses in their share prices.
On Wednesday the bank issued a statement saying, “The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news. Our cash and available liquidity remain solid and exceeded our uninsured deposits.”
The lender noted that there “are ongoing” discussions with potential buyers and investors, as the company is continuing “to evaluate all options to maximize shareholder value.”
Bloomberg reported that according to people familiar with the matter, the bank is exploring options including a breakup, or a capital raise. Sources said, any buyer would need to accept a large loss when marking down some of the bank’s loans.
The selloff of shares Wednesday came after a statement by Federal Reserve Chair Jerome Powell that regulators were getting closer to containing the turmoil which has been roiling the banking sector. Powell noted that the seizure and sale by regulators of ailing First Republic Bank to JPMorgan Chase in a $10.6 billion deal was “an important step toward drawing a line under that period of severe stress” for regional banks.
The collapse of First Republic marked the fourth collapse of a regional bank in the US following the failures of Silvergate Capital, Silicon Valley Bank, and Signature Bank.
Tim Waterer, chief market analyst at KCM Trade, said in an interview with Bloomberg, that the Fed’s statement is unlikely to assuage fears in the market, adding, “Despite the best efforts by Jerome Powell to calm the market, there is nothing to suggest that the banking crisis is at an end.”
