Anxiety about a rush of withdrawals by regional bank clients continues to roil the financial sector, with PacWest Bancorp attempting to reassure investors overnight after its shares fell more than 39%.
PacWest announced early Thursday that it is looking at asset sales, has been approached by numerous parties about a deal, and that discussions are ongoing.
The bank stated that it had not seen a spike in customer withdrawals due to the demise and sale of First Republic Bank following a modern-day bank run.
Anxiety over stability and the risk of contagion gripped other regional banks early Thursday.
Zions Bancorp was down more than 11%, Comerica was down more than 8%, and KeyCorp was down more than 7%.
On Thursday, TD Bank Group and First Horizon Corp. announced the cancellation of their proposed merger, citing regulatory obstacles.
Toronto-Dominion Bank announced in February that it would acquire smaller bank First Horizon for $13.4 billion in cash.
The transaction was scrutinized more closely because of recent developments in the banking sector, and TD Bank has significant business in the United States.
First Horizon’s stock dropped more than 42% before the market opened on Thursday.
The Federal Reserve’s recent steps in its fight against inflation have thrown several institutions off balance.
As part of that strategy, the Federal Reserve boosted its primary interest rate by a quarter-point to the highest level in 16 years on Wednesday, the tenth straight rate hike.
The Fed chair emphasized his conviction that the failure of three significant banks in the last six weeks will likely prompt other banks to reduce lending, which will assist the Fed battle inflation.
“Banks have weathered a tumultuous environment for the past two months, and uncertainty lingers in the smaller regional bank segment,” JPMorgan informed clients.
The business expects bank equities to remain under pressure due to regulatory and economic uncertainties, among other considerations.
“Regulatory concerns would primarily translate into how much banks need to add to the capital, liquidity, and debt, all of which would strengthen them in the long run but hurt EPS,” it said.