PacWest Tumbles As Bank Reports $1.8 Billion Deposit Flight; Regional Bank Stocks Slide

Updated at 9:47 am EST

PacWest Bancorp.  (PACW) – Get Free Report shares traded sharply lower Thursday, pulling a host of regional bank stocks into the red, after the struggling west coast lender reported a near 10% decline in its deposit base over the first few days of the month.

PacWest, which has moved to lower or suspend shareholder payouts in an effort to shore up its balance sheet, said deposits fell by 9.5 during the week ending on May 5, with most of the flight coming after it confirmed reports its has been engaged in talks with potential partners amid a broad study of strategic alternatives.

PacWest scrapped plans to raise capital in March, as bank stocks were pummeled in the wake of the Silicon Valley Bank collapse, and noted late last month that 75% of its then $28.2 billion deposit base fell within the FDIC’s protection threshold.

The bank added it has around $15 billion in ‘immediately available’ liquidity, which is set against $5.2 billion in deposits that aren’t covered by the FDIC’s $250,000 threshold. 

“On the afternoon of May 3, 2023, PacWest was featured prominently in the financial news headlines with reports that PacWest was “exploring all of its options and having talks with potential investors and partners”,” the bank said in a Thursday filing with the Securities & Exchange Commission.

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“The news headlines increased our customers fears of the safety of their deposits,” the statement added. “During the week ended May 5, 2023, our deposits declined approximately 9.5%, with a majority of that decline occurring on May 4th and May 5th after the news reports on the afternoon of May 3rd.”

PacWest shares were marked 26.8% lower in early Thursday trading to indicate an opening bell price of $4.62 each, a move that would extend the stock’s six-month decline to around 85%.

Zions Bancorp  (ZION) – Get Free Report was down 0.2% to $23.71 each while KeyCorp  (KEY) – Get Free Report fell 0.2% to 9.30 each.

Western Alliance Bancorporation  (WAL) – Get Free Report shares rose 1.9% to $27.64 each after the lender Phoenix-based reported a $1.8 billion boost to its deposit base, taking it to $49.4 billion, late Wednesday.

Regional bank stocks had found some support last week after the Fed published data indicating that most of the lending from its emergency facilities was directed toward First Republic prior to its sale to JPMorgan Chase late last month.

Banks borrowed just $5.3 billion from the Fed’s main discount window over the seven-day period ended on May 3, according to Fed data, down from the $73.9 billion handed out over the prior period.

The bulk of that decline, however, was linked to a change in allocation of borrowing from First Republic Bank, which was sold to JPMorgan Chase JPM last Sunday. First Republic’s borrowing’s were labeled as “other credit,” with that tally rising by around 34% to $228.2 billion.

Borrowing from the Fed’s new Bank Term Funding Program, which allows banks to exchange high-quality assets for one-year loans, fell by $5.5 billion to $75.8 billion.

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