Banking on a Downward Slope

Banking on a Downward Slope

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  • On Thursday morning, the decline in regional banks intensified as a number of stocks experienced significant losses. PacWest, which had already started to decline on Wednesday evening after announcing its consideration of strategic options such as a possible sale, plummeted by 45% during early trading and was suspended due to excessive price fluctuations.

  • The bank stated that they will explore all possibilities to enhance shareholder value, according to a statement released by PacWest. In the meantime, the regional lender First Horizon, based in Tennessee, saw a 38% drop in its stock price after it was revealed that its merger agreement with TD Bank had been terminated. The banks issued a press release indicating that the decision was made due to uncertainty about when TD would obtain regulatory clearance for the deal and was not related to First Horizon.

Why it matters

Thursday's actions follow regulators seizing and selling First Republic at a discount to JPMorgan Chase, marking the third regional bank failure since March. First Republic attempted to stabilize itself after significant deposit withdrawals in Q1, but regulators intervened when no market-based solution emerged. The collapse of Silicon Valley Bank caused deposit outflows at many regional banks, raising doubts about their funding stability and asset values. Anticipated regulatory changes further cloud the profitability outlook for this sector.


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