Regional bank shares plunge as possible PacWest sale reignites banking sector fears
PacWest shares plummet 47% after bank says it's exploring 'all options'
The Wall Street Journal chief economics correspondent Nick Timiraos looks ahead to Fed Chair Jerome Powell's speech Wednesday, where he could indicate a rate hike pause.
Regional bank shares resumed their downward spiral on Thursday morning hours after PacWest confirmed it was exploring options to shore up its finances, reigniting fears of a broader banking crisis.
PacWest, a mid-sized lender based in Los Angeles, issued a statement overnight saying it was looking to sell some assets and reviewing other options, including a potential sale.
The bank said in a statement that it had not seen an "outsized flow" in deposits and that it "will continue to evaluate all options to maximize shareholder value."
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A Pacific Western Bank branch in Encino, Calif., on April 22. (Photographer: Morgan Lieberman/Bloomberg via Getty Images / Getty Images)
The news triggered a massive selloff in PacWest's stock, with shares sinking nearly 47% from Wednesday evening.
Other regional bank shares also took a hit.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ZION | ZIONS BANCORPORATION NA | 58.83 | -0.36 | -0.61% |
| PACW | NO DATA AVAILABLE | - | - | - |
| WAL | WESTERN ALLIANCE BANCORP | 89.16 | -0.10 | -0.11% |
| CMA | COMERICA INC. | 67.85 | -0.44 | -0.64% |
| FHN | FIRST HORIZON CORP. (TENNESSEE) | 20.11 | -0.18 | -0.91% |
Tennessee-based First Horizon saw shares plummet more than 36%, while Western Alliance Bancorp tumbled as much as 38%. Comerica dropped about 10%, while Zions Bancorp fell about 9.6%.
The turmoil comes less than one week after the implosion of a third U.S. bank. First Republic, a San Francisco-based bank that catered to the wealthy, was seized by federal regulators and sold to JPMorgan Chase on Monday.
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Both JPMorgan CEO Jamie Dimon and Federal Reserve Chairman Jerome Powell expressed confidence this week that the worst volatility in the financial sector is over.
"There were three large banks, really from the very beginning, that were at the heart of the stress that we saw in early March – the severe period of stress," Powell told reporters on Wednesday. "Those have now all been resolved, and all the depositors have been protected."
Federal Reserve Chair Jerome Powell arrives for testimony before the Senate Banking Committee March 7, 2023 in Washington. ((Photo by Win McNamee/Getty Images) / Getty Images)
Mid-sized banks are struggling, in part, from higher interest rates, which the Fed raised rapidly over the past year from near zero to more than 5%.
The turmoil began in early March with the collapse of Silicon Valley Bank and Signature Bank, which faced massive losses on long-term securities that had tumbled in value due to higher interest rates. When depositors panicked, a bank run ensued.
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Within days, U.S. regulators took extraordinary steps to contain the fallout from the bank's collapse and shore up wavering confidence in the financial system, including protecting all deposits at the two institutions – even those holding funds that exceeded the FDIC's $250,000 insurance limit.
The Fed also launched a new emergency backstop for lenders to help them meet deposit withdrawals under favorable terms.