WAL - PacWest leads regional bank stocks higher after dividend cut bank deposit trends

2023-05-08 08:02:34 ET

Regonal bank stocks continue Friday's rally, with the SPDR S&P Regional Banking ETF ( NYSEARCA: KRE ) gaining 2.1% in Monday premarket trading after PacWest Bancorp ( NASDAQ: PACW ) slashed its dividend to conserve cash in an uncertain backdrop the regional banking sector.

PacWest ( PACW ) stock surged 36% in Monday premarket.  The company's CEO and president, Paul Taylor explained the dividend cut as "a prudent step to accelerate our plans to build capital to CET1 of 10%+." He also added that PacWest's business "remains fundamentally sound."

Bank deposit data also helped to reassure investors. UBS equity analyst Erika Najarian said last week's data from the Federal Reserve provided "no negative surprises," and provides a baseline for next week's data. "We think next week's data will be especially important given the market narrative around continued deposit pressure at regionals, which created the roller coaster ride of last week," she wrote in a note to clients.

As of April 26, week-over-week deposit outflows at mid-cap banks slowed to 49 basis points from 74 bps as of April 19, translating to a +1 bp market share change quarter-to-date, Najarian said. Excluding large certificates of deposit, deposits at mid-cap banks fell 67 bps vs. 97 bps the week before, translating to a -7bps change in market share QTD.

PacWest ( PACW ) was among mid-sized regional bank stocks that tanked after the failures of Silicon Valley Bank and Signature Bank and experienced renewed weakness after JPMorgan Chase agreed to acquire First Republic Bank in a government-brokered deal.

Western Alliance Bancorporation ( NYSE: WAL ), another western regional bank that saw its stock slide after the recent bank stresses, rose 11% in Monday premarket.

Metropolitan Bank Holding ( NYSE: MCB ) gained 10% , Comerica ( NYSE: CMA ) +7.2% , and KeyCorp ( NYSE: KEY ) +3.5% .

BofA Securities U.S. economists led by Aditya Bhave said the balance sheet data "continue to suggest credit conditions in the banking sector have stabilized, though we are not out of the woods yet given the recent resurgence of regional bank stress."

The economists added: "Altogether, the bank and Fed balance sheet data continue to suggest stable to diminishing stress in the banking sector and a slowdown in the growth of total loans and leases in bank credit consistent with tighter monetary policy."

More on Regional Banks:

• PacWest Bancorp: 4 Pros and 2 Cons Make the Stock Worth Buying
• Regional banks revived after brutal week
• Western Alliance Bancorporation: An Update
• Bank rout: Contagion fears, market manipulation or self-fulfilling prophecy
• Western Alliance bounces off of 60%+ drop after regional bank denies sale talk

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