US Banking Crisis Returns as a Clutch of Regional Banks Become Shaky

Trading in San Francisco-based Pacific Western Bank's shares was halted multiple times on Thursday after it crashed nearly 40 percent the previous day, triggering fears of another bank collapse in the US.

PacWest Bancorp's shares sank after investors were spooked over reports of an impending sale of the bank. Recent bank crises in the country, including those at Silicon Valley Bank, Signature Bank and the First Republic stemmed mainly from unprecedented levels of customer withdrawals, but PacWest has said it has not witnessed a similar scenario.

Pacific Western Bank
Pacific Western Bank Reuters

Shares of PacWest have lost a whopping 72 percent so far this year.

Loss of Customer Deposits

According to a USA Today report, Pacific Western Bank lost about 20 percent of customer deposits this year. Following the collapse of SVB, Signature and First Republic, customers have been moving money to bigger banks, the reports adds.

It was just days ago that PMorgan Chase took over the crisis-hit San Francisco bank First Republic. As per the deal, JPMorgan will pay $10.6 billion to the US Federal Deposit Insurance Corp (FDIC) for most of the assets of the failed bank.

First Republic Bank
First Republic Bank Wikimedia Commons

In a worrying turn of events, more regional banks are facing crises. According to the USA Today report, shares of Zions Bancorp and Comerica have also been falling, even as TD Bank Group and First Horizon Corp cancelled their planned merger. Another bank that came under stress is Western Alliance, whose shares also plummeted nearly 60 percent after the Financial Times said the bank was seeking strategic options. However, the lender denied the report categorically, restoring some confidence in the stock.

First Citizens Bank
First Citizens Bank Wikimedia Commons

"Nobody knows where these banks should be trading at because what we saw with Silicon Valley Bank is that the fundamentals can change so quickly ... This normally would have been a great opportunity to buy banks with premier regional presence and it may be, but the real concern is nobody knows what the rules are and what they are valued at," said Tom Plumb, of Plumb Balanced Fund in Madison, according to Reuters.

Amid the fresh round of turmoil at the regional banks, the shares of banking giants in the country also came under pressure. While the S&P 500 Banks index lost 3 percent, JPMorgan's shares dropped 1.4 percent and the shares of Bank of America fell 3 percent.