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PacWest leads regional-bank stock declines as it reports a deposit drop in early May

By Steve Gelsi

PacWest Bancorp's stock lost more than 20% of its value Thursday and weighed on regional-bank shares after lender said it lost 9.5% of deposits during the week ended May 5 amid market volatility.

Western Alliance Bancorp (WAL), however, managed to eke out some small gains as it reported an increase in deposits recently.

PacWest (PACW) said its deposits were affected after First Republic's government-brokered sale to JPMorgan Chase & Co. (JPM), which was announced on May 1.

"This event heightened market and customer fears of additional bank failures, including PacWest," the bank said in a filing with the U.S. Securities and Exchange Commission.

The company's stock price fell about 41% between April 28 and May 5.

Last week, PacWest also generated headlines that it was exploring all of its options and talking to potential investors during that week.

"The news headlines increased our customers fears of the safety of their deposits," the bank said.

The majority of the bank's 9.5% decline in deposits took place on May 4 and May 5, the bank said.

PacWest said it funded the decline in deposits with available on-balance sheet liquidity.

As of May 10, the company's immediately-available liquidity was $15 billion, which exceeds uninsured deposits of $5.2 billion, representing a coverage ratio of 288%, the bank said.

"These recent events, and the ongoing news coverage of these events, has increased certain risks and uncertainties related to our business and future prospects," PacWest said.

Western Alliance Bancorp rose 0.6% after it reported total deposits of $49.4 billion as of Tuesday, with quarter-to-date deposit growth of $1.8 billion from $47.6 billion as of March 31 and higher by about $600 million from $48.8 billion as of May 2.

Insured deposits were approximately 79% of total deposits as of Tuesday, May 9, compared to 68% as of March 31.

See also:PacWest stock jumps after lender says it's 'fundamentally sound' but will slash dividend to a penny a share

"Readily available liquidity is approximately double the amount of uninsured deposits as of May 9," the company said. "The increase in deposits amidst heightened market volatility and challenges at competitors exemplifies the strength and resilience of the bank and its customer relationships."

The KBW Nasdaq dropped 0.8%, the Financial Select Sector SPDR Fund (XLF) dropped 0.3% and the Financial Select SPDR Fund (KRE) moved lower by 1.4%.

Among individual stocks, East West Bancorp (EWBC)is down 1.9%, KeyCorp (KEY) is down 1.4%, Comerica Inc. (CMA) is off by 3.7% and Zions Bancorp (ZION) is declining by 3.5% on Thursday.

PacWest shares are now down nearly 80% in 2023, following the failures of Silicon Valley Bank, First Republic Bank and Signature Bank since early March.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

 

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05-11-23 1209ET

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