Crisis over? Pacwest and Western Alliance rise again as investors bet worst is over
Investors are increasingly hopeful that the crisis which has engulfed US regional banks over the past couple of months is coming to an end.
Some of the banks which have been worst affected by fears of a broader banking crisis in the wake of the collapse of Silicon Valley Bank (SVB) and First Republic have strung together consecutive days of solid gains.
In the last five days Western Alliance has risen over 20 per cent higher and was trading around 3.7 per cent higher today.
Earlier this week, the Arizona-based lender said deposits grew by more than $2bn in the three months to 12 May. This boosted confidence that the deposit outflows which felled SVB and First Republic were unlikely to hit any other lenders.
Pacwest has similarly climbed over 20 per cent in the last five days and was trading over 13 per cent higher today.
California-based Pacwest has been one of the worst affected banks by the market volatility, even suggesting earlier this month that it was considering a sale.
Reflecting the broader confidence, the KBW Regional Bank Index is up 7.5 per cent in the last five days.
Herman Chan, analyst at Bloomberg Intelligence, said: “With industry deposits now stabilizing after the outflows in March, further contagion risk looks contained at the moment.”
But Chan warned that it was too soon to call an end to the crisis given the headwinds still facing the sector. “Near-term market volatility could remain as banks contend with a weaker revenue outlook, more onerous regulation and rising loan losses in areas like commercial real estate,” Chan said.
Regulators are looking at boosting deposit protection in the US in an attempt to prevent further outflows. This will impose extra costs on US banks as they fund the deposit insurance.
It is also expected that Congress will tighten rules on mid-sized lenders. Regulations were watered down in the Trump presidency, widely seen as a key contributor to the crisis.