PacWest, based out of Beverly Hills, has been working with financial experts and advisers to figure out ways it can avert a potential collapse and evaluate longer-term plans for the business. This comes after three other California-based mid-sized banks collapsed in the past few weeks. (Related: Moody’s downgrades ratings of 11 regional banks as banking instability continues.)
People familiar with the situation who spoke to mainstream media outlets, noted that PacWest executives are open to just outright selling the entire bank or parts of it. But the company still hasn’t started a formal auction process, which means it is still considering other options.
An outright sale would be hindered by the fact that there likely aren’t many potential buyers interested in taking control of PacWest, which comprises about 70 branches of the Pacific Western Bank, mostly in California, as well as some commercial and consumer lending subsidiaries. It holds around $44 billion in assets.
A potential buyer would not only be taking control of all of these companies and their assets, but would also have to be willing to take a big loss by marking down some of PacWest’s debts.
Following the release of this report, PacWest’s shares tumbled by 58 percent as of 6:07 p.m. in late New York trading on Wednesday, May 3. The day before, PacWest shares slumped by 28 percent as investors retreated from regional bank stocks following the failure and acquisition of First Republic Bank by JPMorgan Chase. It currently has a market value of about $772 million.
PacWest further reported that its total deposits declined by more than $5 billion during the first quarter of the year to $28.2 billion as of March 31. This would have been lower if not for the net gain of $1.1 billion in deposits the company received from March 20 until the end of the month, caused by customers fleeing from other banks. It also saw its deposits grow by another $700 million from March 31 through April 24.
The company claims around 75 percent of its deposits are currently covered by federal insurance, around four percent higher than at the end of the first quarter.
Despite these solid financials, the bank is still only eking out very small profits. It reported a net loss of $1.21 billion during the first quarter, not including the approximately $860 million in unrealized losses in its securities portfolio.
Regional banks in the United States have been in turmoil after many experienced runs on their deposits due to fears that smaller banks are less stable, along with the possibility that many of their deposits may be uninsured. These fears inevitably led to the collapse of three California-based banks and one in New York – and PacWest may be next.
Following PacWest’s announcement, the stocks of other regional banks declined. The SPDR S&P Regional Banking ETF, a fund that can be used to track the performance of regional banks in the U.S., shed 5.3 percent of its value.
Cleveland-based KeyCorp’s shares fell by seven percent, Dallas-based Comerica Bank slid by 10 percent and, worst of all, the Phoenix-based Western Alliance Bancorporation dropped by a whopping 27 percent.
Other regional banks like Zion Bancorp and First Horizon saw their shares plummet by the single digits.
Learn more about the collapse of banks all over the United States at DebtCollapse.com.
Watch this episode of “Brighteon Broadcast News” as Mike Adams, the Health Ranger, discusses PacWest’s decision to halt trading of its stocks as it figures out how to avert a collapse.
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