(Bloomberg) — PacWest Bancorp said deposits have increased since March and confirmed it’s in talks with several potential investors, seeking to calm markets after a 60% stock rout that made it the new focal point of concern over the health of US regional lenders.
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Shares in the bank plummeted in after-hours US trading on Wednesday after Bloomberg News reported it was considering strategic options including a sale. The sharp moves, which also dragged an ETF tracking regional banks to its lowest level since 2020, came as investors fret the turmoil that’s dogged the sector since early March is yet to be contained.
“The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news,” PacWest said in a statement dated Wednesday. “Our cash and available liquidity remains solid and exceeded our uninsured deposits.”
Smaller lenders are facing a pinch as rising interest rates lower the value of their longer-term investments while increasing the cost of funding. That’s spurring depositors to move cash into higher-yielding money market funds. Investors also worry modern technology allows clients to pull money rapidly out of struggling institutions, funneling deposits instead to the biggest banks which have so-far been insulated from the turbulence.
“Recently, the company has been approached by several potential partners and investors – discussions are ongoing,” PacWest said. “The company will continue to evaluate all options to maximize shareholder value.”
Western Alliance, another US regional lender under pressure, also said Wednesday that it had seen no unusual deposit outflows and reaffirmed its guidance deposits would rise quarter-over-quarter.
Financial heavyweights including hedge fund billionaire Bill Ackman and former Federal Reserve Bank of Dallas President Robert Kaplan are among those warning of more banking stress to come. Speaking before PacWest’s statement, Ackman said he thought the whole US regional banking system is at risk.
“Confidence in a financial institution is built over decades and destroyed in days,” Ackman, chief executive officer of Pershing Square, said on Twitter. “As each domino falls, the next weakest bank begins to wobble.”
First Republic Bank, acquired by JPMorgan Chase & Co. on Monday in a government-led deal, became the fourth US lender to collapse this year, following Silvergate Capital Corp., SVB Financial Group’s Silicon Valley Bank and Signature Bank.
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