Many regional banks have their shares trade sharply lower in pre-market Thursday as confidence in regional lenders remains weak.
PacWest (NASDAQ:PACW) is down about 37% in early trade after the California-based bank confirmed it has explored strategic asset sales. Bloomberg reported yesterday that PacWest is weighing up its strategic options including a possible sale amid concerns about its financial health.
“In accordance with normal practices the Company and its Board of Directors continuously review strategic options. Recently, the Company has been approached by several potential partners and investors - discussions are ongoing. The company will continue to evaluate all options to maximize shareholder value,” PACW said in an update.
It also added that it has “not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.”
As of May 02, total deposits stood at $28 billion.
Commenting on the update, Vital Knowledge analysts said that the update about “considering strategic options” would be considered a positive for most companies, but that’s not the case when it comes to banks.
“Considering strategic options” for a bank, especially in this environment, is thought to be a sign of weakness and vulnerability, an indication of “something” being wrong,” the analysts said.
“This group faces huge earnings question marks going forward as funding & deposit costs rise alongside provisions just as the regulatory environment turns more stringent.”
Similarly, Western Alliance (NYSE:WAL) shares are down nearly 20% and are headed for a fifth straight day of declines amid fragile investor confidence in regional lenders.
The Arizona-based lender also issued a business update yesterday aimed at reassuring investors. The bank said it hasn’t experienced unusual deposit flows following the sale of First Republic Bank with total deposits standing at $48.8B as of May 02.
Quarter-to-date, deposits rose $1.2B. As a result, the bank maintained its $2B quarter-over-quarter deposit growth rate outlook.
Western Alliance also said that insured deposits represented more than 74% of total deposits as of May 2.
Elsewhere, Metropolitan Bank (NYSE:MCB) shares are also down about 15% in pre-open Thursday.