PacWest tumbles after reporting 9.5% drop in deposits last week

PacWest shares tumbled on Thursday after the lender said it lost almost 10 per cent of its deposits in the first week of May following reports it was reviewing strategic options in the wake of First Republic’s sale to JPMorgan Chase.

PacWest had $28bn in deposits as of May 2, but disclosed in a filing on Thursday that these fell by about 9.5 per cent during the week of May 5. The majority of withdrawals were made on May 4 and 5 following reports that the bank was working with a financial adviser to explore strategic options including a sale, which the California-based lender later confirmed.

PacWest shares, which have fallen more than 70 per cent so far in 2023, were trading down about 20 per cent in pre-market trading.

The outflows from PacWest, underscore the recent deposit flight at smaller US banks following the collapse of three midsized lenders in less than two months — Silicon Valley Bank, Signature Bank and First Republic.

“The news headlines increased our customers’ fears of the safety of their deposits,” PacWest said in its 10-Q regulatory filing.

PacWest, though significantly smaller than SVB and First Republic, has drawn negative attention because of its similarities to SVB, including its ties to the tech community, large amounts of uninsured deposits and paper losses on its securities portfolio.

PacWest said it honoured the withdrawals through funds available on its balance sheet and said that it had immediate access to a further $15bn, which exceeded the $5.2bn it had in deposits not covered by FDIC insurance.

The update from PacWest also weighed on other regional bank stocks, including Western Alliance which was down 6.75 per cent and Comerica which was 3.4 per cent lower in pre-market trade on Thursday.

Beverly Hills-based PacWest reported in April that customers had pulled more than $5bn in deposits.

An aggressive tightening campaign by the Federal Reserve since last year has weakened banks which relied on cheap deposits for funding.