- PacWest bank shares dive 47% on Thursday.
- JPMorgan's acquisition of First Republic on Monday has only heightened fears.
- PacWest leadership said it was talking with buyers this week.
- PacWest stock is now down about 90% from the beginnig of banking turmoil in March.
PacWest Bancorp (PACW) is flailing yet again, and now we can say it is certain that March's banking crisis did not end with the sale of First Republic to JPMorgan on Monday. After stablizing on Wednesday following Tuesday's near 28% dive, PacWest stock is off a further 47% in early trading on Thursday. No material news appears to have triggered the current sell-off as bank officials have been saying all week that they are in talks with possible buyers and are also mulling a capital raise.
PacWest stock news
PACW stock is trading near $3.41 on Thursday, nearly 90% below its share price from late February. Silicon Valley Bank's demise led to a run on a number of regional banks, mostly banks based in the US West or California. Western Alliance is down more than 22% on Thursday, while Zions Bancorp (ZION) and Comerica (CMA) are each off 8%.
Some of the worries stem from regional banks' exposure to commercial real estate, an industry that has a large vacancy rate at the moment. The covid pandemic's work from home policies have extended well past the end of the pandemic, and many corporations have begun reducing their office footprint. Manhattan currently has an office vacancy rate above 16%, but many other major US cities are seeing far higher rates of availability.
The worry is that with higher interest rates pushing up the monthly rent on these offices since most loans are variable rate, many commercial landlords may begin handing the keys back to their lenders. Commercial real estate loans are concentrated at major regional banks like PacWest rather than at the largest national or money-center banks.
PacWest stock shot up some 14% when it reported first quarter results last week. Deposits did jettison the bank during the height of March's turmoil following Silicon Valley Bank's collapse, but this ended quickly. Deposits rose $1.8 billion to $28.9 billion in between the end of March and the earnings call on April 25. From the outside, it appears that PacWest has a healthy balance sheet. Interest income did fall YoY, but overall profits rose.
PacWest stock forecast
PacWest stock is offering a reading of 20 on the Relative Strength Index (RSI). The stock is clearly oversold. It would be unsurprsing if opportunistic traders began buying up shares as there is no certainty that PacWest is anwhere near insolvency. A major rebound following good news could easily send PACW stock back up to $10 rather quickly for a 200% gain.
PACW daily chart
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