Regional banks rebound for second day as PacWest cuts dividend, says firm ‘fundamentally sound’


A branch of Pacific Western Bank in Encino, Calif. on Saturday, April 22, 2023.

Morgan Liberman | Bloomberg | Getty Images

PacWest Bankcorp again led a relief rally at regional banks on Monday after the troubled lender cut dividends to build capital amid the banking crisis.

PacWest shares soared 38% in premarket trading on Monday, adding to a nearly 82% rise 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.”

Other regional banks also rebounded for a second day. The SPDR S&P Regional Banking (KRE) ETF rose 2.8% pre-market, after rallying 6.3% on Friday. Western Alliance jumped 8% in pre-market on Monday after gaining 49% in the previous session, and Zions Bancorp was up 4% on Monday.

Stock chart iconStock chart icon


“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.

Concerns about regional banks lingered after regulators took over the First Republic last week, leading to the third U.S. bank failure since 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.

Stock chart iconStock chart icon

hide content

Regional Bank ETF 1 day

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 is down 10% in May and 35% for the year to Friday.

Source link

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top