What happened
Shares of PacWest Bancorp (PACW), a $44 billion asset lender based in Los Angeles, had plunged by nearly 57% as of 10:49 a.m. ET today after media reports about a potential sale of the bank last night spooked investors. At one point in after-hours trading yesterday, shares were down close to 60%.
So what
Since the collapse of SVB Financial in March, investors have kept a close eye on PacWest because they noticed some similar characteristics, and the stock has declined significantly since then.
However, PacWest reported its first-quarter earnings results last week, which largely seemed to reassure investors because the bank had seen a rebound in deposits. But trading has been extremely volatile in the banking sector and has been difficult to fully understand.
This morning, PacWest provided an update, saying it has not seen abnormal deposit outflows this week and that total deposits are currently around $28 billion, although that is down from the $28.9 billion number the company provided as of April 24.
But management said its plan moving forward remained consistent with what it said during the bank's first-quarter earnings call. Management is planning to sell a $2.7 billion lender finance portfolio in order to boost its capital levels. Furthermore, the company said that it has recently been approached by potential partners and investors and will consider options that would maximize shareholder value.
Following the update, analysts remained generally upbeat, suggesting that the significant price action is fear driven.
Now what
When PacWest stock began to plunge last night, I was baffled by the move. I would like to see the company boost its capital levels but it does seem to have a plan in place and deposits seemed to have stabilized.
While the move very well could be a big overreaction I'm personally going to sit on the sidelines for now because fear seems to be at an all-time high in the sector right now and it's just hard to know what happens next.
