PacWest Bank, loses billions in deposits and enters a renewed market spiral
Another medium-sized bank faced a confidence crisis on Thursday, as Pacific Western Bank said it had lost nearly 10 percent of its deposits over the past week, sparking another plunge in its already low share price.
The multibillion-dollar deposit flight was described in a filing filing that suggested new problems at the Los Angeles-based lender. The bank’s stock fell 23 percent, a much sharper decline than other banks that have been the focus of investor concerns following the recent collapses of Silicon Valley Bank, Signature Bank and First Republic Bank.
PacWest, with $44 billion in assets and offices mostly in California, grew rapidly as a lender to the tech world, a resemblance to some of the fallen banks that have proven unlucky in recent times. In its regulatory filing on Thursday, PacWest said the repossession and sale of First Republic in early May “made the market and customer more fearful of more bank failures, including PacWest.”
On May 3, the bank confirmed it planned to either 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 it had “not experienced any extraordinary deposit flows”.
That seems to have changed. The bank said in Thursday’s filing that the turbulent stock price increased its clients’ “fears for the safety of their deposits” and accelerated withdrawals from PacWest accounts.
PacWest now has about $25 billion in deposits, compared to 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 after the banking crisis triggered by the bankruptcy of Silicon Valley Bank, medium-sized lenders remain under pressure, largely because their battered stock prices are leading to consumer concerns.
There is no easy way out. PacWest, along with its similarly sized competitors, increasingly relies on government borrowing to plug its financial holes. However, with inflation and interest rates rising, the cost of that form of financing has risen, straining banks’ already squeezed margins.
In contrast to the past few weeks, when the shares of medium-sized banks were sawed off en masse, PacWest took the brunt of the damage. Other stressed lenders, including Comerica and Zions Bank, traded with smaller losses Thursday. The broader market was largely undisturbed, with the S&P 500 down 0.2 percent.
Western Alliance, a Phoenix-based bank primarily focused on businesses, said in a statement that his deposits had actually increased by $600 million, or 1 percent, to nearly $50 billion over the past week. Shares closed slightly.