By Max Reyes and Bre Bradham | Bloomberg
Los Angeles-based PacWest Bancorp and Western Alliance Bancorp led the big selloff in regional lenders Tuesday, as renewed fears over the health of the financial system hit Wall Street after the second-largest US bank failure ever.
Trading in both firms triggered multiple volatility halts after PacWest fell as much as 42% while Western Alliance plunged 27%. The KBW Regional Banking Index dropped as much as 7%, the most since the crisis that engulfed Silicon Valley Bank in March.
Charles Schwab Corp., a brokerage with a banking arm that’s come under pressure in the recent rout, sank 5.3%. Comerica Inc. and Zions Bancorp. each fell more than 10%.
The turmoil comes a day after JPMorgan Chase & Co.’s Jamie Dimon said the current banking crisis is nearing its end after his bank’s purchase of First Republic, though he acknowledged it’s possible another small lender could fail. The regional bank gauge is already down 29% so far this year.
“Wall Street is wondering which bank could be the next one that needs a rescue and that is making it easy to pick on the other regional banks,” said Edward Moya, Oanda senior market analyst. “It looks like JPMorgan’s deal for FRC gave us one day of calm for the banking sector. Regional banking stocks are still looking vulnerable until we see clear signs that emergency lending programs can go away.”
Western Alliance and PacWest are among a number of regional banks that investors have zeroed in on after the collapse of Silvergate Capital Corp., SVB Financial Group’s Silicon Valley Bank, and Signature Bank in March. The turmoil demonstrated the threat posed to commercial lenders by asset-liability mismatches and uninsured deposits. Still, both Western Alliance and PacWest posted earnings results in April that appeared to appease investors, while indicating their deposit bases had stabilized or recovered after initial outflows in March.
Part of what’s driving bank shares…
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