Bloomberg reported that shares of PacWest Bank halved in after-hours trading. It signifies that in the most recent crisis, more regional banks are collapsing. Thus, they are looking for strategic options as well as a sale. Actually, ‘exploring strategic options’ is a common Wall Street lingo for “please help”. The last bank exploring strategic options was First Republic Bank. Then this bank failed, thus JPMorgan purchased most of its assets. In this case, PacWest bank did not rush to respond to the media.
Based on Bloomberg’s anonymous sources, PacWest has been planning to sell itself. On the other hand, bidders are yet to come out of the woodwork. Therefore, the bank considers splitting up the company and trying to raise capital. This is in the hope of supporting the bank itself. As interest rates have surged, just like other regional banks, the value of PacWest’s loans and bond holdings are crumbling.
This became the reason why PacWest customers yanked their deposits in March due to the fear that the bank might fail. Plus, they’ll be leafing while holding the bag. The Federal Deposit Insurance Corp insures accounts that hold more than $150.000. However, many businesses own lots more money in their accounts. Much is not even insured. Therefore, the bank and its competitors have a core problem: the bank will run out of cash to pay them when customers keep drawing their accounts.
Investors are nervous since PacWest’s stock has plunged 75% this year. However, PacWest said that it is stabilizing. This is in comparison to the most recent collapses of Silicon Valley Bank and Signature Bank. Meanwhile PacWest reported that their customers stopped withdrawing their money.
