(New York) The American regional bank Pacific Western Bank (PacWest) resumed its vertiginous fall on the stock market Thursday after mentioning a possible sale, a communication which tensed the market, fearing a new episode of the banking crisis.
Shortly after Wall Street opened, PacWest stock fell 41%.
The regional establishment, based in Los Angeles (California), brought with it other players such as the bank of Phoenix (Arizona) Western Alliance (-19%) and KeyCorp (-8%), parent company of the KeyBank network, based in Cleveland, Ohio.
After Monday’s emergency takeover of First Republic, PacWest is sometimes seen as the new weak link in the system.
Pacific Western, or PacWest, is the 53rd largest U.S. bank by asset size, valued at $41 billion at the end of 2022.
In the wake of regional brands, the whole sector was in the red on the New York market, whether Wells Fargo (-2.58%), JPMorgan Chase (-1.62%) or Bank of America (-1 .78%), the big names in the market who have nevertheless done well since the start of the crisis by attracting tens of billions of deposits from regional banks.
“ We did not have a period of calm after the takeover of First Republic ”, noted Edward Moya, from Oanda. “The target has moved from one bank to another and the sector is in trouble. »
On Wednesday, after the closing of the New York Stock Exchange, its leaders indicated, in a press release, “examining all strategic options” and having been “approached by several potential partners and investors”. “Discussions are continuing,” they said.
“PacWest has insisted that it considers the study of strategic options as normal practice, but there is nothing normal about the reaction of the share price to this announcement”, reacted, in a note, Patrick O’Hare, from Briefing.com.
The message was intended to be reassuring, however, PacWest indicating that it had not recorded any exceptional withdrawals after the takeover on Monday of First Republic by JPMorgan Chase, following its takeover by the American authorities to avoid bankruptcy.
“Our available cash and liquidity resources remain solid”, assured the establishment, according to which they exceed the total of all of its deposits, including those which are not covered by the public guarantee, limited to 250,000 dollars. per customer and per bank.
In the first quarter, PacWest nevertheless saw its deposits melt by 17%, according to results published last week.
Also on Wednesday, Western Alliance also claimed not to “have recorded any unusual movements on its deposits” after First Republic passed into the fold of JPMorgan Chase.
Since the beginning of the banking crisis, at the beginning of March, four establishments have been closed or taken over, Silvergate Bank, Silicon Valley Bank (SVB), Signature Bank and First Republic.
“ This banking crisis is something that we will have to deal with until the end of the year, or even beyond,” says Edward Moya. “There are going to be more banks under stress. »
Tensions in the banking sector are accelerating the tightening of credit conditions, already at work since the start of the US central bank’s (Fed) monetary tightening cycle last year.
“And as credit takes a hit, it will weigh on growth and dampen the confidence” of consumers, businesses and investors, warns Edward Moya.
The negative sentiment about American banks was further accentuated on Thursday by the cancellation of the takeover of the Memphis (Tennessee) First Horizon establishment by the Canadian TD Bank, announced in February 2022 for 13.4 billion dollars.
The two banks justified this renunciation by the uncertainty concerning the validation of the transaction by the regulators.
First Horizon took this turn of events very badly, its share price plunging 36% on Wall Street.