Another midsize bank faced a crisis of confidence on Thursday, as Pacific Western Bank said that it had lost nearly 10 percent of its deposits over the last week, sparking a renewed plunge in its already depressed share price.
The deposit flight, which amounts to billions of dollars, was detailed in a regulatory filing that suggested new trouble at the Los Angeles-based lender. The bank’s stock fell 23 percent, a much steeper decline than other banks that have been the focus of investors’ worries after the recent collapses of Silicon Valley Bank, Signature Bank and First Republic Bank.
PacWest, with $44 billion in assets and branches primarily in California, grew fast as a lender in the technology world, a similarity to some of the fallen banks that has proved unfortunate of late. In its regulatory filing Thursday, PacWest said that the seizure and sale of First Republic at the beginning of May “heightened market and customer fears of additional bank failures, including PacWest.”
On May 3, the bank confirmed that it was looking to sell itself or raise more money, a sign of weakness in its business that sent its shares down sharply. Around that time, the bank said that it had “not experienced out-of-the-ordinary deposit flows.”
That appears to have changed. The bank said in the filing Thursday that its turbulent share price increased its customers’ “fears of the safety of their deposits,” and accelerated withdrawals from PacWest accounts.
PacWest now has about $25 billion in deposits, compared with just over $28 billion at the end of March. The bank did not respond to a request for comment.
The new pressure on PacWest is a reminder that two months into the banking crisis set off by the failure of Silicon Valley Bank, midsize lenders remain under pressure, largely because their battered share prices are leading to worries among customers.
There is no easy way out. PacWest, along with its similar-size competitors, has increasingly been relying on borrowing from the government to plug its financial holes. With inflation and interest rates rising, however, the cost of that form of financing has increased, squeezing banks’ already pressured margins.
In a deviation from recent weeks, when the shares of midsize banks were whipsawed en masse, PacWest took the brunt of the damage. Other pressured lenders, including Comerica and Zions Bank, traded with smaller losses on Thursday. The broader market was largely undisturbed, with the S&P 500 falling by 0.2 percent.
Western Alliance, a Phoenix bank that caters primarily to businesses, said in a statement that its deposits had actually risen over the past week by $600 million, or 1 percent, to nearly $50 billion. Its shares closed down slightly.
Source: New York Times
