By
Tolu Ajiboye
July 26th, 2023
There are various choices accessible to PacWest Bancorp that could assist the business overcome the present shares devaluation.
PacWest Bancorp (NASDAQ: PACW), a regional bank based in California, is seeing its shares plummet by 23%, days after reporting a 9.5% drop in deposits for the week ending May 4, 2023.
Notably, the decline in deposits was attributed to media reports that the regional bank was considering several strategic options in the wake of the current banking chaos in the US. Interestingly, stocks of PacWest were already down by 50% this month, and over 70% for the year.
The fact that PacWest’s stock price tumbled by 20% in response to the news highlights the level of concern among investors. When a bank’s deposits decline, it can be a sign of broader financial troubles that could ultimately threaten the bank’s long-term viability. As a result, shareholders might be more inclined to sell their bank shares, which could cause the stock price to drop significantly.
The regional banking sector has experienced a major contagion with Western Alliance Bancorporation (NYSE: WAL) stock plunging by down last week. The stock has shed more than 38% and changing hands at a price of $18.20. Similarly, shares of Zions Bancorporation (NASDAQ: ZION) also dropped by 2.7%, while the SPDR S&P Regional Banking ETF (KRE) were down 1.9%.
Since the beginning of March, regional banks in the US have been facing regulatory actions due to concerns about their financial health. As a result, Silicon Valley Bank, Signature Bank, and were finally seized by regulators. First Republic Bank (OTCMKTS: FRCB) was also taken over and sold to JPMorgan Chase & Co (NYSE: JPM).
It is worth noting that the failure of a bank can have serious consequences for the broader economy. It can lead to job losses, financial market instability, and damage to confidence in the banking system.
PacWest Shares Recovery Options
There are various choices accessible to PacWest Bancorp that could assist the business overcome the present shares devaluation. Firstly, the regional bank could improve consumer confidence by talking openly about the bank’s financial health, emphasizing its strengths, and laying out strategies to rectify any weaknesses.
Secondly, PacWest may consider merging with or acquiring another bank in order to gain scale and improve its competitiveness. This could also help the bank diversify its operations and expand into new markets. Meanwhile, the bank has previously announced that it is considering selling its assets after efforts to raise capital remain afloat.
In addition, PacWest could cut its operating expenses to boost its profitability and financial health. This could entail laying off employees or closing branches, renegotiating contracts with suppliers, or establishing more efficient processes. Markedly, the bank has established to cut down shareholders’ dividends.
Finally, PacWest may also resort to repurchasing its own stock to bolster the stock price. This could indicate to investors that the bank believes its shares are undervalued and is optimistic about its long-term prospects.
Ultimately, the bank will need to thoroughly assess its condition and identify the best course of action to enhance its financial performance and restore investor trust.