PacWest Stock Soars After Slashing Quarterly Dividend, Says Business Is ‘Sound’; Regional Banks Extend Rally

PacWest Bancorp.  (PACW) – Get Free Report extended its recent rally Monday, pulling a host of regional bank stocks higher, after the struggling Los Angeles-based lender slashed its quarterly dividend in order to preserve cash and bolster its balance sheet.

In a late Friday update, PacWest said it would payout a dividend of one penny per common share, down from a prior level of 25 cents, citing current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements.”

The bank confirmed reports last week that its in talks with potential partners amid a broad study of strategic alternatives, which could include a fresh capital increase or the breakup of its Pacific Western Bank franchise from its other consumer and commercial lending businesses.

PacWest scrapped plans to raise capital in March, as bank stocks were pummeled in the wake of the Silicon Valley Bank collapse, and noted last week that 75% of its total $28.2 billion deposit base fell within the FDIC’s protection threshold.

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“Our business remains fundamentally sound, and we will continue with our strategy to focus on our relationship-based community banking model,” CEO Paul Taylor said late Friday.

PacWest shares, which soared by 81.7% on Friday, were marked another 35.6% higher in pre-market trading, indicating an opening bell price of $7.81 each. Western Alliance Bancorp WAL shares jumped 10.5% to $29.90 each while Zions Bancorp gained 3.8% to $24.66 each.

Regional bank stocks have rallied hard since the Fed published data late Thursday indicating that most of the lending from its emergency facilities was directed towards First Republic prior to its sale to JPMorgan Chase late last month.

Banks borrowed just $5.3 billion from the Fed’s main discount window over the seven-day period ending on May 3, according to Fed data, down from the $73.9 billion handed-out over the prior period.

The bulk of that decline, however, was linked to a change in allocation of borrowing from First Republic Bank, which was sold to JPMorgan Chase JPM last Sunday. First Republic’s borrowing’s were labeled as “other credit”, with that tally rising by around 34% to $228.2 billion.

Borrowing from the Fed’s new Bank Term Funding Program, which allows banks to exchange high-quality assets for one-year loans, fell by $5.5 billion to $75.8 billion.

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