PacWest Bancorp’s stock plunged more than 50 percent on Thursday amid fears that it will be the next domino to fall in a slew of regional bank failures. By the closing bell, its shares traded at around $3, down from $27 in early March.
The Los Angeles-based bank said Thursday it will try to sell a $2.7 billion loan portfolio and seek outside funding to shore up its balance sheet. Like many regional banks, PacWest is suffering from huge unrealized losses on investments that lost value due to rising interest rates.
“The company will continue to evaluate all options to maximize shareholder value,” PacWest said in a statement.
First Republic Bank went under this week because wealthy depositors pulled their money from the San Francisco-based lender in the aftermath of the Silicon Valley Bank failure in mid-March.
But PacWest didn’t see nearly as many withdrawals as First Republic. Phoenix-based Western Alliance, which actually boosted its deposits since early March, saw its stock plummet 38 percent on Thursday.
Their fate represents a key test case for regional banks, which are go-to lenders for small businesses. Experts have made the case that these banks can survive unrealized losses as long as their depositors don’t withdraw their cash.
