Regional Bank Stocks Fall Led by PacWest and Western Alliance
PacWest and Western Alliance shares resumed their downward trajectory in premarket trading on Tuesday, as investors feared the banking crisis would worsen.
PacWest plummeted 13.6%, a day after its decision to reduce its quarterly dividend failed to assuage concerns about its financial stability. The KBW Regional Banking Index had hit a 30-month low after the failure of First Republic Bank and PacWest’s announcement of exploring strategic options.
As per S&P Global Market Intelligence data, PacWest and Western Alliance were among the firms that saw the most significant drop in deposits in the first quarter after First Republic.
Additionally, the Federal Reserve’s survey, one of the first gauges of sentiment in the sector since the recent spate of bank failures, showed that firms of all sizes had a weaker demand for credit than three months prior.
The contraction in credit to US businesses and households in Q1 was likely due to the rise in interest rates, as opposed to a sudden plunge in credit that some had feared after the March collapse of Silicon Valley Bank, the Fed survey revealed.