Shares for PacWest plummeted on Thursday after the bank revealed that deposits fell considerably last week amid broader concerns with the financial sector.
PacWest, which is based in Beverly Hills, California, and also serves clients in Arizona, Utah, and Texas, witnessed deposits fall 17% between the end of December and the end of March, from $34.0 billion to $28.0 billion, according to a first quarter earnings report from the company. Another securities release published on Thursday indicated that deposits declined another 9.5% last week, with most of the decreases occurring after news stories on May 4 and May 5 discussed the company’s troubles.
The document noted, however, that the bank maintains immediately available liquidity of $15.0 billion, far exceeding the $5.2 billion in uninsured deposits held at the financial institution.
News of the robust coverage ratio nevertheless failed to prevent investor concerns over the declining deposits: shares for PacWest tumbled more than 25% on Thursday as of the early afternoon, trading at $4.49 relative to $6.08 at market close on Wednesday. Stock prices for the company have therefore dropped more than 83% from the $26.68 seen on March 8, the day before the financial sector tumult.
The renewed pressure on PacWest came in the days after the implosion of First Republic Bank, a development which occurred weeks after Silicon Valley Bank and Signature Bank similarly collapsed, as account holders with balances above the Federal Deposit Insurance Corporation threshold at the three medium-sized banks rushed to withdraw their funds.
PacWest said in a statement on May 4 that the company “has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.”
Federal Reserve Chair Jerome Powell insisted at a press conference last week that the banking system is “sound and resilient” even after the volatility in early March and the collapse of First Republic Bank. “We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again,” he commented.
Interest rate hikes from the Federal Reserve contributed to the substantial losses incurred by Silicon Valley Bank as executives sold a long-term bond portfolio to cover withdrawals. Assets in the banking system are now $2 trillion lower than their book value as a result of the rate hikes, according to a study from analysts at the National Bureau of Economic Research.
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Western Alliance, another regional bank based in Phoenix, Arizona, serves clients throughout the western part of the country and had likewise seen tumult on the stock market after the sale of First Republic Bank. Two people briefed on discussions at Western Alliance claimed in a report for the Financial Times that the firm was considering options such as a full or partial sale, an assertion that the bank called “absolutely false” as a spokesperson contended that the article was “an instrument of short sellers and as a conduit for spreading false narratives about a financially sound and profitable bank.”
Western Alliance confirmed in a statement on Thursday that deposits have slightly increased since the beginning of last week while “readily available liquidity is approximately double the amount of uninsured deposits” as of Tuesday. Share prices for the company were relatively flat on Thursday as of the early afternoon, trading at $27.60 relative to the $27.48 closing price on Wednesday, despite a 61% decline from $71.56 on March 8.