Bank’s stock drops as deposits decrease again.

PacWest Bank Deposits Plummet, Shares Drop Over 25%

Overview

PacWest Bank, based in Beverly Hills, California, saw a 17% decrease in deposits between December and March, according to a first quarter earnings report. The bank also reported a 9.5% decline in deposits last week, following news stories about the company’s troubles. Despite having $15.0 billion in immediately available liquidity, shares for PacWest dropped over 25% on Thursday, trading at $4.49.

Background

PacWest Bank serves clients in Arizona, Utah, and Texas, and has been hit hard by the recent financial sector tumult. The bank’s declining deposits have raised investor concerns, with stock prices dropping more than 83% from March 8. The implosion of First Republic Bank, as well as the collapse of Silicon Valley Bank and Signature Bank, have contributed to the renewed pressure on PacWest.

Response

PacWest Bank has stated that it has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news. Federal Reserve Chair Jerome Powell has insisted that the banking system is “sound and resilient” despite recent volatility. However, interest rate hikes from the Federal Reserve have contributed to substantial losses for Silicon Valley Bank and other regional banks.

Western Alliance

Western Alliance, another regional bank based in Phoenix, Arizona, has also seen tumult on the stock market following the sale of First Republic Bank. The bank has denied rumors of a full or partial sale, stating that it is financially sound and profitable. Despite a 61% decline in share prices since March 8, Western Alliance reported a slight increase in deposits and readily available liquidity that is double the amount of uninsured deposits.

Conclusion

The recent financial sector tumult has had a significant impact on regional banks like PacWest and Western Alliance. While both banks have maintained their financial soundness, declining deposits and stock prices have raised investor concerns. The Federal Reserve has pledged to learn from this episode and work to prevent similar events from happening in the future.

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