A branch of Pacific Western Bank in Encino, Calif. on Saturday, April 22, 2023.
Morgan Liberman | Bloomberg | Getty Images
PacWest Bancorp gave up most of an early rally on Monday as the rebound in regional bank stocks appeared to falter.
PacWest shares rose about 5% on Monday, adding to a pop of nearly 82% on Friday. The company announced Friday evening a cut in the dividend to just 1 cent per share, from 25 cents per share in the previous quarter. PacWest CEO Paul Taylor reassured investors that the bank’s business remains “fundamentally sound.”
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“Given the current economic uncertainty, recent volatility in the banking sector, and potential changes to regulatory capital requirements, we view the dividend cut as a prudent step to accelerate our capital build plans,” he said. Taylor said in a statement.
The stock opened nearly 30%, but gains faded in morning trading.
PacWest
Other regional banks also coughed up early gains. Western Alliance and Zions Bancorp were both slightly higher but far from their session highs. The SPDR S&P Regional Banking ETF (KRE) fell 1.4%.
Concerns about regional banks lingered after regulators took over the First Republic last week, leading to the third U.S. bank failure since early March. A rapid rise in interest rates weighed on banks with long-term bond assets, causing deposits to flee. Institutions with a high proportion of uninsured deposits found themselves particularly vulnerable as customers feared losing their savings in a bank run.
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PacWest said last Wednesday it was exploring “all options,” confirming it was in talks with several potential partners and investors. The California-based bank said it had not experienced “unusual deposit flows” after the collapse of the First Republic.
PacWest shares were down more than 40% in May and 75% for the year through Friday. The SPDR Regional Banking ETF was down 10% in May and 35% for the year to Friday.
Concerns persisted despite comments last week from JPMorgan Chase CEO Jamie Dimon and Federal Reserve Chairman Jerome Powell that the first stage of the regional banking crisis was over.
The struggles for regional banks have led some Wall Street pros and former regulators to call for changes to support the sector. Ideas include expanding the scope of deposit insurance or instituting a ban on short-selling bank stocks, though regulators have shown no signs that either he other proposal is about to be implemented.
Correction: PacWest Bancorp again led a relief rally at regional banks on Monday. An earlier version had misspelled the bank’s name.
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