Beverly Hills bank PacWest Bancorp saw a significant drop in its share price on Wednesday after Bloomberg reported the company was “weighing strategic options.”
Overnight, the share price dropped by around 60%.
The bank has recorded growth in its core accounts and has been in discussions with many potential purchasers since March. According to Bloomberg, bank officials were contemplating whether to dissolve or seek new capital. Bloomberg reported on Wednesday that unnamed sources said the bank has not yet started the official selling procedure.
There are reportedly few buyers interested in purchasing the entire bank, which consists of the Pacific Western Bank, a community lender, and a few industrial and consumer banking operations. According to Bloomberg’s sources, any potential buyer would have to take a hit by writing down a sizable portion of the company’s debts.
The company’s attempt to calm the market was based on the false premise that it had undergone a bank run or ran out of funds.
The sale of First Republic Bank and other recent developments, according to a statement released by PacWest, have not changed the bank’s deposit practices. Please keep in mind that “our cash and available liquidity remains solid and exceeded our uninsured deposits.”
The stock price of the bank looked to have steadied during pre-market trading, while still being down by 30% from the previous day’s closing.
Thursday’s opening prices were also down for shares of numerous U.S. regional banks. The stock price of Western Alliance Bancorporation, for instance, fell by more than 15%. Western Alliance’s quarterly savings have been rising, as was previously reported.
Few hours after Federal Reserve Chairman Jerome Powell hailed the sale of First Republic to J.P. Morgan Chase as “an important step toward ending that period of severe stress,” regional banks once again began selling off their holdings. In addition, he said that the panics that have plagued regional banks since the middle of March may have been resolved with the settlement of the three most distressed regional banks (Signature in New York, Silicon Valley in San Francisco, and First Republic).
When asked about the problems that began in early March, Powell said, “there were three big banks at the center of the trouble we saw from the start.” There are currently zero issues. He reassured the public that they could trust those financial institutions with their money.