Is it Packwest?... Continuous Sharp Decline Amid 'Sale Review' (Comprehensive)

Fear of the U.S. banking crisis, which seemed to be subsiding, swept the market again in just one day. The spark was ignited when, less than a day after JP Morgan, the largest bank in the U.S., acquired the recently failed First Republic Bank, news emerged that California regional bank PacWest Bancorp was considering a sale. Investors began selling off PacWest, leading to a sharp market crash over two days, raising concerns that PacWest might follow in the footsteps of First Republic.

PacWest, based in Los Angeles (LA), California, and listed on the U.S. Nasdaq market, was down 58% in after-hours trading as of 5:58 p.m. local time on the 3rd. The sell-off intensified following the news of the potential sale after market close. Major foreign media outlets, citing multiple sources, reported that PacWest had selected investment bank Piper Sandler as the lead advisor to explore the possibility of a sale. Official sale procedures have not yet begun. However, sources indicated that alongside the sale plan, funding options are also being reviewed.

PacWest’s liquidity crisis surfaced six weeks ago when it raised $1.4 billion (approximately 1.9 trillion KRW) from Atlas SP Partners, an investment firm owned by Apollo Global Management. PacWest recorded a net loss of $1.21 billion (about 1.6 trillion KRW) in the first quarter of this year. During this period, deposits exceeding $5 billion were withdrawn, and unrealized losses (book losses) on bonds and other securities held by the bank amounted to $860 million.

PacWest’s stock price, which plunged 27.78% compared to the previous day in regular trading the day before, closed down 1.98% in regular trading on the day. Trading of PacWest shares was temporarily halted at one point due to the sharp decline. Since the banking crisis erupted in early March, the stock price has fallen by 77%.

[Image source=Yonhap News]

In regular trading on the same day, the stock prices of other regional banks also showed notable declines. Western Alliance in Phoenix, Arizona, fell 4.4%, Zions Bancorporation in Salt Lake City dropped 5.3%, and Comerica in Dallas declined 4.4%.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), who implemented a baby step (a 0.25 percentage point increase in the benchmark interest rate) that day, also made remarks about the banking sector crisis during a press conference after the Federal Open Market Committee (FOMC) regular meeting, which further heightened market concerns.

Powell said regarding the regional banking crisis, "The banking sector situation has generally improved since March, when SVB failed," but he also pointed out that "stress in the banking sector is creating tighter credit conditions for households and businesses." This means that banks, in response to banking sector tensions, may tighten lending further to reduce risk. The Fed also warned in its policy statement that such credit tightening could weigh on employment, the economy, and inflation.

This content was produced with the assistance of AI translation services.