PacWest Bancorp attracted unwanted attention this year after deposit outflows called into question whether it could survive. Among the firm’s customers, though, its reputation was for some of the highest interest rates available on savings accounts.
(Bloomberg) — PacWest Bancorp attracted unwanted attention this year after deposit outflows called into question whether it could survive. Among the firm’s customers, though, its reputation was for some of the highest interest rates available on savings accounts.
Now, after being rescued earlier this week with a merger agreement, PacWest has pledged to pay down costlier funding — possibly spelling the end for the sweetheart deals scored by those who left deposits with the company.
As of Thursday, the bank was still offering the highest savings rates on money market deposit accounts and high-yield certificates of deposit out of 40 deposit-taking institutions that work with Raisin, a German financial-technology firm that helps savers shop for better rates.
PacWest customers could snag a 5.25% annual yield on funds placed in a money market account, and a 5.51% rate if they put it in a 12-month CD offered by the bank through the fintech. That put the Beverly Hills-based lender well ahead of other institutions offering customers deals on Raisin, including Western Alliance Bancorp.
A string of bank collapses in March sparked deposit outflows that led PacWest to agree to be bought by Banc of California Inc., a transaction brokered in part by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon that was meant to shore up the two West Coast lenders.
Read More: Dimon’s Touch and a Beach Club Dinner Sealed PacWest Rescue
Before that deal came together, interest expenses at PacWest had soared more than 1,300% in the first six months of the year as the teetering California lender loaded up on loans from the Federal Reserve. Bank executives had already taken an ax to many of the firm’s key businesses, but losses on asset sales had sapped profits. And paying through the nose for deposits would contribute to those higher costs.
(Corrects percentage of interest expense increase in the final paragraph.)
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