Traders work on the floor of the New York Stock Exchange on April 26, 2023 in New York City.
Michael M. Santiago | Getty Images
The rout in regional banks picked up steam again on Thursday morning, with several stocks suffering sizeable losses.
PacWest sank 54% was halted for volatility multiple times. The slide began on Wednesday evening following news that the Los Angeles-based bank was exploring strategic options, including a potential sale.
Shares of PacWest were poised to open sharply lower on Thursday.
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The bank said in a statement that it “will continue to evaluate all options to maximize shareholder value.” PacWest’s strategic review was first reported by Bloomberg News and later confirmed by CNBC.
Meanwhile, Tennessee-based First Horizon also fell 36% after the regional lender and TD Bank announced that they were terminating their merger agreement. The banks said in a press release that the move was due to uncertainty around when TD would receive regulatory approval for the deal and was not related to First Horizon.
Shares of First Horizon were under pressure after the lenders’ merger with TD Bank was called off.
Other notable declines included a drop of more than 38% for Western Alliance and about 13% for Zions Bancorp. The SPDR S&P Regional Banking ETF (KRE) was down 6.2%.
Western Alliance’s slide came despite an update from the company on Wednesday evening that showed deposits have grown since the end of March.
“That hasn’t taken the heat off of the stock, or the bond prices. … Investors are very nervous, and I think what they’re nervous about is the fact that Silicon Valley lost 75% of their deposits in 36 hours. There’s not a bank in the world that could really sustain that,” KBW CEO Tom Michaud said on CNBC’s “Squawk on the Street.”
Thursday’s moves come less than a week after First Republic was seized by regulators and sold at a discount to JPMorgan Chase, marking the the third failure of a regional bank since the start of March.
First Republic had searched for weeks for a market solution to stabilize itself after massive deposit withdrawals in the first quarter, but none materialized and regulators stepped in.
Many regional banks saw deposit outflows in March around the collapse of Silicon Valley Bank, raising questions about the stability of their funding and the value of some assets on their books that were not marked to market. Expected regulatory changes have also clouded the long-term profit outlook for the group.
JPMorgan CEO Jamie Dimon and Federal Reserve Chair Jerome Powell expressed optimism this week that the initial wave of bank failures has passed, but the drops for the stocks show that investors still lack confidence.
Michaud said that federal officials might need to change rules around deposit insurance, at least temporarily, to restore confidence in the banking system.
“This turmoil is still rolling, and I think it won’t stop until we build some stability into the system,” Michaud said.
