PacWest on the Verge of Becoming the Next Failed American Bank
- The regional bank lost 9.5 percent of depositors last week.
- Shares of the bank dropped by 23 percent on Thursday.
Troubles in the American banking industry continue as the shares of PacWest Bancorp (NASDAQ: PACW) decrease 23 percent on Thursday after the regional bank disclosed a massive deposit outflow.
Troubles at PacWest
The California-based lender disclosed in a filing on Thursday with the Securities and Exchange Commission (SEC) that it had lost 9.5 percent of its deposits last week. The filing highlighted that the ongoing news headlines around PacWest fueled the outflow from the bank.
"On the afternoon of May 3, 2023, PacWest was featured prominently in the financial news headlines with reports that PacWest was 'exploring all of its options and having talks with potential investors and partners.' The news headlines increased our customers' fears of the safety of their deposits," the lender stated in the filing.
The bank said that most of its deposits were withdrawn on May 4 and 5.
PacWest Bancorp down 23% after saying on Thursday it lost 9.5% of deposits in the days following JPMorgan Chase's acquisition of First Republic Bank on May 1, the fourth government-brokered bank transaction this year.$PACWpic.twitter.com/uISy3jtURU
— Alexander Stahel 🇺🇦 (@BurggrabenH) May 11, 2023
To tackle this stressed situation, PacWest pledged $5.1 billion to the Federal Reserve's discount window on Wednesday, opening up an additional borrowing capacity of $3.9 billion. Now, the bank has $15 billion in immediately available liquidity, exceeding its uninsured deposits of $5.2 billion.
"We pledged additional assets as collateral for borrowings to increase our liquidity position for potential deposit outflows," the bank stated in the filing, adding that it will consider selling some assets in the second quarter to improve liquidity and capital position. Additionally, last week, the bank slashed dividend distribution to strengthen its financial position.
The Grim Condition of the American Banking System
PacWest's operational troubles are alarming, especially after the collapse of the three American banks in recent months. Depositors of the Silicon Valley Bank and Signature Bank were rescued by the American government in March with a bailout package, while JPMorgan Chase recently bought assets of the collapsed Californian bank, First Republic.
PacWest has been facing investors' fury for a while, as its shares dropped 80 percent since March 8. However, its share prices recovered from bottoming out on May 4.
The PacWest situation exploded after top figures on Wall Street and Washington showed optimism, saying the worst of the crisis was over. US President Joe Biden also stated that the American banks are now "safe and sound."
Meanwhile, other American regional banks are facing the investors' squeeze with the ongoing situation. Shares of several other regional banks fell on Thursday, with the KBW Nasdaq Regional Banking Index dropping 2.4 percent.
US Regional Bank Stocks Today:
— The Kobeissi Letter (@KobeissiLetter) May 11, 2023
1. PacWest, $PACW: -29%
2. Western Alliance, $WAL: -6%
3. Metropolitan Bank, $MCB: -5%
4. Fifth Third, $FITB: -4%
5. Zions Bank, $ZION: -3%
6. Regions Financial, $RF: -3%
7. Comerica, $CMA: -3%
8. First Horizon, $FHN: -2%
Every time this…
Troubles in the American banking industry continue as the shares of PacWest Bancorp (NASDAQ: PACW) decrease 23 percent on Thursday after the regional bank disclosed a massive deposit outflow.
Troubles at PacWest
The California-based lender disclosed in a filing on Thursday with the Securities and Exchange Commission (SEC) that it had lost 9.5 percent of its deposits last week. The filing highlighted that the ongoing news headlines around PacWest fueled the outflow from the bank.
"On the afternoon of May 3, 2023, PacWest was featured prominently in the financial news headlines with reports that PacWest was 'exploring all of its options and having talks with potential investors and partners.' The news headlines increased our customers' fears of the safety of their deposits," the lender stated in the filing.
The bank said that most of its deposits were withdrawn on May 4 and 5.
PacWest Bancorp down 23% after saying on Thursday it lost 9.5% of deposits in the days following JPMorgan Chase's acquisition of First Republic Bank on May 1, the fourth government-brokered bank transaction this year.$PACWpic.twitter.com/uISy3jtURU
— Alexander Stahel 🇺🇦 (@BurggrabenH) May 11, 2023
To tackle this stressed situation, PacWest pledged $5.1 billion to the Federal Reserve's discount window on Wednesday, opening up an additional borrowing capacity of $3.9 billion. Now, the bank has $15 billion in immediately available liquidity, exceeding its uninsured deposits of $5.2 billion.
"We pledged additional assets as collateral for borrowings to increase our liquidity position for potential deposit outflows," the bank stated in the filing, adding that it will consider selling some assets in the second quarter to improve liquidity and capital position. Additionally, last week, the bank slashed dividend distribution to strengthen its financial position.
The Grim Condition of the American Banking System
PacWest's operational troubles are alarming, especially after the collapse of the three American banks in recent months. Depositors of the Silicon Valley Bank and Signature Bank were rescued by the American government in March with a bailout package, while JPMorgan Chase recently bought assets of the collapsed Californian bank, First Republic.
PacWest has been facing investors' fury for a while, as its shares dropped 80 percent since March 8. However, its share prices recovered from bottoming out on May 4.
The PacWest situation exploded after top figures on Wall Street and Washington showed optimism, saying the worst of the crisis was over. US President Joe Biden also stated that the American banks are now "safe and sound."
Meanwhile, other American regional banks are facing the investors' squeeze with the ongoing situation. Shares of several other regional banks fell on Thursday, with the KBW Nasdaq Regional Banking Index dropping 2.4 percent.
US Regional Bank Stocks Today:
— The Kobeissi Letter (@KobeissiLetter) May 11, 2023
1. PacWest, $PACW: -29%
2. Western Alliance, $WAL: -6%
3. Metropolitan Bank, $MCB: -5%
4. Fifth Third, $FITB: -4%
5. Zions Bank, $ZION: -3%
6. Regions Financial, $RF: -3%
7. Comerica, $CMA: -3%
8. First Horizon, $FHN: -2%
Every time this…