PacWest Bancorp led a rebound across US regional banking stocks following a bruising week of losses, amid escalating worries over the health of the industry following the recent collapse of several lenders.
(Bloomberg) — PacWest Bancorp led a rebound across US regional banking stocks following a bruising week of losses, amid escalating worries over the health of the industry following the recent collapse of several lenders.
PacWest’s shares gained as much as 26% in US premarket trading on Friday, while peers Western Alliance Bancorp and First Horizon Corp. rose 15% and 5.4%, joining in a broader rally across US stocks futures ahead of jobs data due later in the day.
The rise in share-prices comes after the collapse of First Republic Bank earlier in the week sent peers tumbling. The rout spread to bigger lenders, with the KBW Bank Index recording an 11% drop this week.
PacWest shares plunged 51% on Thursday in its worst one-day loss on record, after the Beverly Hills-based lender confirmed it’s in talks with several potential investors. Western Alliance slumped 38%, paring an earlier drop after denying a report that it’s exploring strategic options. First Horizon plummeted after its proposed $13.4 billion merger with Toronto-Dominion Bank fell apart.
While some investors have cautioned that there could be more pain to come, others have pointed out that the plunge has gone too far. Federal Reserve Chair Jerome Powell said that the resolution of First Republic after regulators seized the lender was an “important step toward drawing a line” under bank turmoil.
“The tension between poor market sentiment and strong liquidity at regional banks is difficult to reconcile as investors take a draconian view of banks’ capital and operating models,” Bloomberg Intelligence analyst Herman Chan said.
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