Pacwest shares slump as US lender moves to boost borrowing capacity
Shares of Pacwest Bancorp slumped 25 per cent premarket on Thursday as the bank pledged additional assets as collateral to increase its borrowing capacity under the US Federal Reserve’s discount window and said it had $15bn (£11.9bn) of immediately available liquidity.
The lender pledged an additional $5.1bn of its loans to the central bank on Wednesday, which Pacwest said resulted in an additional borrowing capacity of $3.bn.
“We pledged additional assets as collateral for borrowings to increase our liquidity position for potential deposit outflows,” the bank said in a filing.
The $15bn liquidity is more than enough to cover the $5.2bn of uninsured deposits at the Los Angeles, California-based bank, it said.
During the week ended 5 May, deposits declined about 9.5 per cent, the bank said, adding the majority of those outflows happened on 4 May and 5 May after news reports said Pacwest was exploring options.
Worries about the stability of mid-sized banks have deepened in recent days with investors punishing stocks even of seemingly healthy lenders, despite reassurances from regulators the banking sector is financially sound.
Shares of other lenders including Western Alliance Bancorp, KeyCorp and Zions Bancorp also fell in premarket trade.
So far this month, Pacwest shares have lost nearly 40 per cent. The bank’s shares plunged to a record low last week after it said it was exploring strategic asset sales.
The bank said it intends to complete the asset sales in the second quarter of 2023.
At the end of the first quarter, Pacwest had $341.7m in cash and cash equivalents, which it said would be sufficient to fund cash flow needs over the next 12 months.
Wall Street executives and bank analysts have urged regulators to provide greater protection for bank deposits and consider other backstops, arguing only a strong intervention could put an end to the crisis.
Niket Nishant, Reuters