L.A.-based bank PacWest sees shares drop as it explores asset sales
PacWest Bancorp is the latest regional bank to come under pressure amid rising interest rates, with its shares down more than 40% Thursday.
In an overnight statement, the Los Angeles-based bank said it has explored strategic asset sales, including moving a $2.7 billion lender finance portfolio to “held for sale.” The bank also said it is considering strategic options that it did not specify.
“Recently, the Company has been approached by several potential partners and investors - discussions are ongoing,” the bank’s statement reads. “The company will continue to evaluate all options to maximize shareholder value.”
On the same day, regional bank First Horizon also saw its stock fall about 32%, after announcing that it was no longer going to be sold to TD Bank.
Other midsize banking stocks suffered Thursday as well. Comerica stock fell by 8.5%, Western Alliance by 25% and Zions by 7%.
The banking tremors come after the Federal Reserve hiked its core interest rate by 0.25% Wednesday, marking the 10th rate increase in 14 months. Rising rates in the United States and globally have put the banking sector under pressure, as seen by the failure of Silicon Valley Bank and Signature Bank in March. Credit Suisse was shuffled into a merger with its larger rival UBS. And San Francisco’s First Republic was seized by regulators and its assets sold to JPMorgan Chase.
Fed officials have said they expect rising rates to slow the economy as part of their effort to fight inflation, but the resulting credit crunch has made banks more reluctant to lend money. For his part, Fed Chairman Jerome H. Powell said Wednesday that it still wasn’t clear how significant those effects will be or how they will shape monetary policy in the coming months.
PacWest officials said the bank has not experienced unusual deposit flows after the recent sale of First Republic Bank’s assets, adding that its core customer deposits have increased since late March. The company’s cash and available liquidity remain “solid,” it noted.
The bank released its statement after its stock plunged more than 50% in late trading Wednesday, a drop that occurred after Bloomberg News reported that the institution is exploring a possible sale.