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After this week’s difficulties, PacWest cuts its dividend to lows

After this week’s difficulties, PacWest cuts its dividend to lows

The US regional bank PacWest, one of the entities most affected by the banking turmoil in recent months in that country, reduced dividends to its investors from 25 cents per share to just one cent.

After the heavy losses in its price this week, the entity decided to reduce dividends due to the volatility of the sector.

However, the Californian bank stressed in a statement that its business is “fundamentally safe.”

“Given the current uncertainty in the economy, recent volatility in the banking sector, and potential changes in capital requirements by regulatory authorities, we consider the dividend reduction a prudent step to accelerate our plans to raise capital,” he said. PacWest CEO Paul Taylor, according to the Bloomberg agency.

Following the trend of other regional banks, PacWest’s share price closed yesterday with a rebound of 81.7% on Wall Street, recovering practically everything lost this week.

Previously, last Wednesday, its price collapsed after it was reported that the company was analyzing “strategic options”, including the possibility of a sale.

Despite the recovery, its share – with a value of US$ 5.76 – is still far from the US$ 26.68 it was quoted in March, before the collapse of Silicon Valley Bank (SVB).

The fear in the markets is that regional banks will continue to be exposed to large potential losses due to the rise in interest rates in the United States.

One of the causes that caused the fall of the SVB and other banks was investing in long-term Treasury bonds whose value depreciated with the rise in FED rates.

The same applies to the loans and mortgages granted before the rate hike, whose speed of adjustment took banks by surprise.

The fear that these banks did not have sufficient support for deposits generated a series of runs in March, which, however, have stabilized in recent weeks.

Among analysts, it is considered that the market “overreacted” this week with the banks, and that the losses in their prices do not coincide with the liquidity situation that they currently present.

In fact, PacWest itself clarified this week that “it did not register any leakage of deposits outside the original after the sale of First Republic Bank, this week”, and that its insured deposits – that is, they have State support by being less than US$ 250,000- exceed 75%.

What the market awaits are the reactions that the regulatory authorities will have in the coming weeks.

According to various reports, the Federal Deposit Insurance Corporation (FDIC), the federal regulatory body in charge of guaranteeing bank deposits, will publish a proposal next week to get funds back, after having emptied them to a large extent to rescue deposits from clients of SVB and Signature Bank.

In order to avoid deepening the tensions of small and medium-sized banks and give them some relief, the FDIC would exempt banks with less than US$ 10,000 million in assets from the cost that it will make the entities pay to rebuild the bank. well.

Source: Ambito

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