The regional bank crisis, which seemed to have settled after the largest U.S. bank JP Morgan's sudden acquisition of the bankrupt First Republic Bank, is showing signs of spreading again. Shares of PacWest Bancorp, a California-based regional bank, plunged more than 50% in after-hours trading on the 3rd (local time) as anxious investors rushed to sell following news that the bank is considering a sale. After nearly a 30% drop the previous day, the stock continued its sharp decline for the second day, raising concerns that it might follow in the footsteps of First Republic, which went bankrupt within a week.
PacWest, based in Los Angeles (LA), California, and listed on the Nasdaq market, was down about 58% in after-hours trading as of 5:58 p.m. local time that day. The sell-off was driven by news of the potential sale announced after market close.
Major foreign media outlets cited multiple sources reporting that PacWest is exploring a sale possibility with investment bank Piper Sandler. According to sources, no formal sale process has yet begun, and funding options are also being reviewed alongside the sale plan.
PacWest faced a liquidity crisis six weeks ago after raising $1.4 billion (approximately 1.9 trillion KRW) from Atlas SP Partners, an investment firm owned by Apollo Global Management. In its recent Q1 earnings report, PacWest disclosed a net loss of $1.21 billion (about 1.6 trillion KRW). During this period, over $5 billion in deposits were withdrawn, and unrealized losses (book losses) on bonds and other securities held by the bank amounted to $860 million.
PacWest shares, which plunged 27.78% in regular trading the previous day, closed down another 1.98% on this day. The stock had also been halted temporarily earlier the previous day due to the sharp decline. Since the bank crisis erupted in early March, the stock has fallen by 77%.
In regular trading that day, other banks also saw declines of 4-5%, including Western Alliance in Phoenix, Arizona (4.4%), Zions Bancorp in Tracy City (5.3%), and Comerica in Dallas (4.4%).
The bank crisis, which seemed to have been resolved after First Republic Bank was abruptly acquired by JP Morgan over the past weekend, has continued without even a day’s pause.
Jerome Powell, Chair of the U.S. Federal Reserve (Fed), who implemented a baby step (a 0.25 percentage point increase in the benchmark interest rate) that day, also fueled market concerns with his remarks on the banking sector crisis during the post-Federal Open Market Committee (FOMC) press conference.
Powell pointed out regarding the regional bank crisis that "the banking sector situation has generally improved since March, when SVB went bankrupt, but tensions in the banking sector are causing a conservative stance on credit for households and businesses." He confirmed that credit tightening caused by the banking sector turmoil could weigh on employment, the economy, and inflation.
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