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PacWest Bancorp Mulls Sale of Entire Holding Company amid 80% Stock Drawdown since March

Summary:
Los Angeles-based PacWest is considering several strategic options, including a sale, amid a banking crisis-induced stock plunge. Bank holding company PacWest Bancorp is reportedly mulling a sale following Wednesday’s 50% stock crash. The regional bank is weighing strategic options amid the US banking crisis, which sank three financial institutions in March. A Bloomberg report said PacWest shelved previous efforts to raise capital to remain afloat and now strongly considers selling all its assets outright. Inside sources revealed that PacWest has been working with a financial adviser on moving forward. These sources stressed that although the California-based lender is open to a sale, it has yet to begin a formal auction process. Also, according to people familiar with the matter,

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Los Angeles-based PacWest is considering several strategic options, including a sale, amid a banking crisis-induced stock plunge.

Bank holding company PacWest Bancorp is reportedly mulling a sale following Wednesday’s 50% stock crash. The regional bank is weighing strategic options amid the US banking crisis, which sank three financial institutions in March. A Bloomberg report said PacWest shelved previous efforts to raise capital to remain afloat and now strongly considers selling all its assets outright.

Inside sources revealed that PacWest has been working with a financial adviser on moving forward. These sources stressed that although the California-based lender is open to a sale, it has yet to begin a formal auction process. Also, according to people familiar with the matter, PacWest faces significant obstacles in its bid to sell outright because only a few potential buyers are interested in the entire Los Angeles-based bank. The entire PacWest Bancorp comprises community lender Pacific Western Bank and a handful of commercial and consumer lending ventures. Unfortunately, any potential buyer could also sustain a sizable loss marking down some of PacWest’s loans.

PacWest Considers Full Asset Sale as a Way to Optimize Shareholder Value Amid Declining Stock

PacWest views a potential sale as a way to “maximize shareholder value” amid its recently battered stock. The West Coast bank also noted that it had not sustained unusual deposit outflows since JPMorgan’s (NYSE: JPM) First Republic sale was announced Monday.

The PacWest development comes six weeks after the California lender announced a $1.4 billion fundraising to shore up liquidity. However, the bank has already projected excess financial buoyancy should it eventually find a buyer for its prime assets. According to Reuters, the potential sale of PacWest’s $2.7 billion lender finance loan portfolio would prop up the common equity tier-one ratio. This increase would see the bank’s core tier 1 capital-to-total risk-weighted assets rise from 9.21% to at least 10%.

Although headquartered in Los Angeles, California, PacWest has branches in Durham, North Carolina, and Denver, Colorado. The bank’s recent 52% stock crash feeds into a broader 80% drawdown since the regional banking crisis began in March. However, PacWest is not the only financial institution to take a massive hit in value recently. According to reports, Phoenix-based rival Western Alliance Bancorp (NYSE: WAL) also suffered a 23% decline yesterday, which reflected bleak investor faith in regional banks. Following its drawdown, Western Alliance also sought to assuage investors that there was no cause for alarm. On Wednesday, the leading US bank claimed it had not experienced unusual withdrawals and had adequate liquidity. In a press release, Western Alliance said:

“The Bank has not experienced unusual deposit flows following the sale of First Republic Bank and other recent industry news. Total Deposits were $48.8 billion as of Tuesday, May 2, up from $48.2 billion as of Monday, May 1, and flat to Friday, April 28. Quarter to date, deposits are up $1.2 billion from $47.6 billion as of March 31.”

Western Alliance also reaffirmed its previously-stated $2 billion quarter-over-quarter deposit growth rate guidance.

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Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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