Hard blow to US banks: PacWest sinks 50% after announcement of possible sale

Hard blow to US banks: PacWest sinks 50% after announcement of possible sale

The actions of PacWest Bancorp they sink 50% in the premarket on Wall Street after the entity confirmed that it contemplates “options” on its future and even the possibility of a sale slipped. The market is discounting that it will be the next American bank to fall, after First Republic Bank will end up in the hands of JP Morgan some days ago.

Other small regional American banks are also falling hard in the ‘premarket’. For example, Western Alliance plunges more than 22% and Comerica is down 7%. The SPDR S&P Regional Banking ETF (KRE), which groups US regional banks, is recording falls of 4.3%.

What happened to PacWest?

PacWest Bancorp said late Wednesday that it was in talks with potential partners and investors on strategic options after shares of the Los Angeles-based bank and several other regional US banks fell amid fears of a worsening banking crisis.

In a statement, PacWest said it had not experienced any unusual deposit outflows since the sale of First Republic Bank to JPMorgan Chase & Co. was announced Monday.

The planned sale of its $2.7 billion portfolio of bank financing loans was ongoing and, once completed, would increase its top-quality capital ratio to at least 10% from 9.21%, the bank added.

“In accordance with usual practice, the company and its board of directors continually review strategic options,” PacWest said.

“Recently, the company has been approached by a number of partners and potential investors. Discussions are ongoing. The company will continue to evaluate all options to maximize shareholder value,” he added.

Reuters previously reported on Wednesday that PacWest was exploring strategic options, including a possible sale or capital increase, after a cash injection announced in March failed to inspire confidence in its flagging share price, citing a person familiar with the matter.

The nervousness in the sector comes after a period of relative calm and could restrict the availability of credit throughout the United States and hurt growth.

“Trust in a financial institution is built over decades and destroyed in days. As each domino falls, the next weakest bank begins to falter,” billionaire investor Bill Ackman wrote in a tweet. Ackman asked regulators to establish a broad deposit guarantee.

“Until investors are rewarded for betting on a floundering bank, there will be no supply, and the best sale is last price,” he wrote.

PacWest shares have lost nearly 90% of their value since the regional banking crisis began on March 8. Other regional banks, whose shares have come under pressure this week.

banking crisis

The crisis of America’s regional banks began in March, when a rapid onslaught on social media about Silicon Valley Bank led to its abrupt closure and sent depositors at all regional banks fleeing for the safety of the largest banks.

The problems forced regulators to step in with emergency measures. The markets seemed to calm down at the end of last month.

Although First Republic, a California-based bank for the wealthy, became the third bank to fail since March, regulators expected its sale to JPMorgan at an auction held over the weekend by the Federal Deposit Insurance Corporation (FDIC). , for its acronym in English) put an end to the crisis.

However, the operation revived fears in the market. Some investors warned that the crisis was not over and funds bet that other dominoes could still fall.

Big banks and venture capital firms have been reluctant to offer capital injections to regional banks without state backing, fearing losses on their low-yielding assets such as loans and investment portfolios.

The cost of insuring against further losses in shares of US regional banks stood near a one-month high in options markets on Wednesday.

on WednesdayUS Federal Reserve Chairman Jerome Powell reiterated that the country’s banking system was resilient, while announcing another 25 basis point rate hike.

Source: Ambito

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