PacWest is weighing strategic options, including possible sale
PACWEST Bancorp, a regional bank teetering following the collapse of three rival California-based lenders, has been weighing a range of strategic options, including a sale, according to people familiar with the matter.
The Beverly Hills-based bank has been working with a financial adviser and has also been considering a break-up or a capital raise, said the people, who asked to not be identified because the matter isn’t public. While it is open to a sale, the company hasn’t started a formal auction process, the people said.
An outright sale has been hindered because there aren’t many potential buyers interested in the entire bank, which comprises a community lender called Pacific Western Bank and some commercial and consumer lending businesses, the people said. A potential buyer would also have to potentially book a big loss marking down some of its loans, they added.
A representative for PacWest declined to comment.
PacWest tumbled 58 per cent at 6.07 pm in late New York trading. The shares had slumped 28 per cent on Tuesday (May 2) as investors retreated from regional bank stocks following JPMorgan Chase & Co’s deal on Monday for the failed First Republic Bank. PacWest, which has lost about 85 per cent of its value since the beginning of March, had a market value of about US$772 million.
The bank said when reporting earnings last month that deposits had stabilised after a rush of withdrawals in March prompted concerns about its health and forced it to shore up liquidity. The bank has been exploring the sale of its lender finance business to free up capital and shrink its balance sheet.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
PacWest has about 70 branches, primarily in California, as well as about US$44 billion in assets, according to its website.
Regional woes
US regional banks have been in turmoil after a run on deposits struck several lenders, ultimately leading to the collapse of three California-based banks and one in New York. The stocks have been wobbling after rising interest rates depressed the value of bonds that regional lenders bought when rates were low, and a surge in customer withdrawals forced some of them to sell those assets at a loss.
PacWest, led by chief executive officer Paul W Taylor, tried multiple times to reassure investors about its stability, with the bank saying on March 10 that it had taken steps to bolster itself, and then on Mar 22 saying that deposits had stabilised.
But it also put aside efforts to raise capital at the time, explaining it wouldn’t be prudent under current conditions. Instead, it lined up US$1.4 billion from a financing facility provided by Atlas SP Partners, and bolstered its finances with cash from various federal programmes. BLOOMBERG
Share with us your feedback on BT's products and services
