Shares of PacWest Bancorp (PACW.O) rebounded on Tuesday, gaining 2.3% after losing 10% earlier in the day. The bank’s decision to cut its quarterly dividend caused investor uncertainty about the financial health of U.S. regional banks, leading to skittish trading in their stocks.
PacWest’s stock had plummeted to a record low last week but has since rallied by over 92% in the last three sessions. Piper Sandler analyst Matthew Clark believes that PacWest and other banks are not trading in line with their fundamentals.
Other regional banks were also choppy: Western Alliance (WAL.N) lost 1.4%, Valley National Bancorp (VLY.O) lost 1.5%, First Horizon Corp (FHN.N) lost 1.3%, and Synovus Financial Corp (SNV.N) lost almost 1%. Despite that, Comerica Inc (CMA.N) and Zion Bancorp (ZION.O) both gained 0.39% and 0.66%, respectively.
The KBW Regional Banking Index (.KRX) fell 0.72% on Tuesday and was hovering near its 30-month low hit last week after the collapse of First Republic Bank and PacWest’s decision to explore strategic options.
According to New York Federal Reserve President John Williams, the U.S. banking system was sound and resilient, and the acute phase was over, with only a few banks having problems.
Among the largest declines in deposits after First Republic Bank were PacWest and Western Alliance, according to S&P Global Market Intelligence. To end the current regional bank crisis, analysts have called for the Federal Deposit Insurance Corp (FDIC) to increase its deposit coverage.
Increasing FDIC limits is the only way to instill confidence in people and prevent them from moving their money to larger banks,” said Running Point Capital’s chief investment officer Michael Ashley Schulman. Alternatively, smaller banks will be destroyed.
In conclusion, PacWest Bancorp shares rebounded on Tuesday, but the volatility in the regional banking sector continues to be a concern for investors.