Shares of PacWest, a regional bank, plummeted by 20% following an announcement that its deposits had fallen by 9.5% in the previous week.
The decline in stock prices prompted concerns about the stability of regional bank stocks, with PacWest experiencing the most significant drop of approximately 23%.
The extended trading session saw about 4.8 million shares traded, although this was an improvement from earlier when the stock was down by roughly 29%.
The bank’s regulatory filing disclosed that customers withdrew a substantial portion of their deposits, particularly on May 4th and May 5th, coinciding with reports of PacWest exploring strategic options for its assets.
In its quarterly update, PacWest revealed that it had pledged additional assets as collateral to secure funds and enhance liquidity in response to potential outflows.
The bank reported having $5.2 billion in uninsured deposits, suggesting that a $15 billion deposit lifeline could cover those deposits adequately.
While PacWest assured it had sufficient cash flow to meet its needs for the next 12 months, the repercussions of the deposit decline were felt throughout the regional banking sector.
Other regional banks, such as Western Alliance, Zions Bank, and Bank of Hawaii, experienced significant stock declines but not to the extent of PacWest.
Ongoing updates and analysis of regional banks would be provided throughout regular trading hours.
The article also mentioned that the Dow Jones Industrial Average had been relatively stagnant until the developments concerning PacWest surfaced.
The news about PacWest’s deposit decline contradicted earlier beliefs that the situation was stabilizing.
The article emphasized the impact that incremental updates to a story can have, citing the example of PacWest’s strategic options exploration triggering a confidence move resulting in customers withdrawing their funds.
The mention of investor Stanley Druckenmiller suggested that while he did not anticipate a crisis on the scale of 2008-2009, he warned against dismissing the current situation entirely.
Concerns lingered among market participants due to uncertainty surrounding the extent of potential risks in the financial sector.
In addition to the PacWest news, there were reports of certain large financial firms and private equity groups facing challenges.
However, further information about these reports was not provided in the available information.
