May 11 (Reuters) – Shares of PacWest Bancorp (PACW.O) plunged 23% on Thursday after the Los Angeles-based lender said its deposits had fallen and it had deposited more collateral with the US Federal Reserve to boost its liquidity. enlarge.
PacWest deposits fell 9.5% or $1.5 billion last week, with the majority of those outflows occurring on May 4 and 5 following news reports that the bank was exploring options to strengthen its finances, including a sale.
PacWest is one of several US regional lenders whose stocks have been hit this month by investor concerns about the health of the sector following the collapse of three banks since March.
“The news headlines have increased our customers’ fears for the safety of their deposits,” the bank said.
Shares of PacWest and other regional lenders fell sharply on Thursday after the Federal Deposit Insurance Corporation said about 113 of the country’s largest lenders will bear the cost of replenishing the $16 billion that recent bank failures have poured into the deposit insurance fund. .
A new 0.125% “special assessment” fee would be applied to banks’ uninsured deposits of more than $5 billion, based on the amount of uninsured deposits a bank held at the end of 2022, the FDIC said.
KeyCorp (KEY.N) and Zions Bancorp (ZION.O) lost 2.5% and 4.5%, respectively. Valley National Bancorp (VLY.O) lost 2.8% and Comerica Inc (CMA.N) lost 6.8%. The KBW Regional Banking Index (.KRX) fell 2.4%.
PacWest said it financed the shortfall in its deposits with cash from its balance sheet and then pledged $5.1 billion of its assets to the Fed to secure additional $3.9 billion in liquidity.
As a result, the bank said it had $15 billion in immediate liquidity, which is 288% higher than its $5.2 billion in total uninsured deposits.
“The decline in deposits seems to have overshadowed things, but overall it was a positive update,” said Wells Fargo analyst Jared Shaw, who assigns an “equal weight” to PacWest stock. “It showed they had liquidity and they could still sell their loans.”
PacWest shares, which have lost nearly 40% so far this month and tumbled to an all-time low last week, fell another 23% on Thursday. Short sellers have made $123.76 million betting against PacWest, according to data from analytics firm Ortex.
Western Alliance (WAL.N), meanwhile, reported that its total deposits increased by nearly $600 million to $49.4 billion and that its instant liquidity was nearly double that of uninsured deposits. Shares of the bank, which also collapsed last week on investor health concerns, lost 0.77%.
“It feels like things are more stable at Western Alliance and they’ve been able to handle the challenges,” Shaw said.
A PacWest spokesperson did not immediately respond to a request for comment, while Western Alliance declined to comment.
Jamie Dimon, CEO of JPMorgan Chase & CO (JPM.N), said on Thursday that regional banks are “pretty strong” after reporting good earnings, and that the industry and regulators “just need to be prepared for trouble.”
Dimon said he expected more banking regulation as a result of the crisis, adding that authorities including the US Securities and Exchange Commission (SEC) should investigate short selling of bank stocks and possible collusion over social media posts. JPMorgan had agreed last week to acquire First Republic Bank in a $10.6 billion deal framed by regulators.
A study by New York Fed researchers also published on Thursday found that rebalancing of bank deposits following the collapse of Silicon Valley Bank, which raised concerns about a wider crisis, was largely limited to “super-regional” institutions in the US. range from $50 billion to $250 billion. .
Deposits at “community banks and smaller regional banks … were relatively stable by comparison,” the researchers found, with the largest banks receiving inflows as money left the super-regional group.
Reporting by Niket Nishant in Bengaluru; Edited by Krishna Chandra Eluri