PacWest Bancorp Stock Trading Halted, PACW Plummets by 30%

May 2, 2023

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PacWest Bancorp its first quarter results for 2023 on April 25, revealing significant losses. The recent halt in stock trading is likely due to a surge in selloffs, possibly in response to the recent wave of bank collapses.

Stock Price Plunges for PacWest and Western Alliance

Both PacWest Bancorp and Western Alliance Bancorp experienced significant drops in their stock prices, falling by 30% and 21% respectively. Investors seem to be losing trust in the banking system following the collapse of several prominent financial institutions.

JUST IN: PacWest Bancorp stock trading halted, citing volatility, after sinking 30% today.

— Watcher.Guru (@WatcherGuru)

First Republic’s Seizure and Sale Impact

The recent seizure and sale of First Republic’s assets to JPMorgan Chase may have left investors feeling uneasy. This deal highlights the widening gap between “too big to fail” banks and smaller regional banks. Although the sale to JPMorgan Chase ultimately resulted in lower losses to the FDIC’s Deposit Insurance Fund, it also reinforced the advantages held by the largest banks during the crisis.

Uncertainty and Additional Costs for Small Banks

The First Republic deal added another $13 billion of losses to the Deposit Insurance Fund, totaling more than $35 billion in losses from SVB Financial, Signature Bank, and First Republic. Small banks are lobbying to avoid a special assessment, but there’s no guarantee they won’t have to pay. Higher FDIC assessment fees were already on the horizon before the crisis began.

Selling Off Preferred Stock

Investment manager Cohen & Steers has reportedly been selling preferred stock associated with regional banks, further contributing to the recent sell-off. Elaine Zaharis-Nikas, senior portfolio manager at Cohen & Steers, emphasized the need for a different type of analysis in the current market.

Macro Fears and the Federal Reserve’s May Meeting

The Federal Reserve’s May meeting, set to conclude with an expected quarter-point interest rate hike, is also causing investor anxiety. If the Fed indicates that more rate hikes are forthcoming, it could lead to a jump in bond yields, negatively impacting banks’ funding costs and unrealized losses in their bond portfolios.

Looking Ahead for the Banking Industry

While the sale of First Republic’s assets was seen as a step forward for the industry, it has renewed focus on potential bank failures. Regional banks may face heightened regulation and pressure on funding costs and earnings this year. However, the current sell-off appears to be more fear-driven than based on concrete issues within the industry.

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