Regional Bank Collapses: Financial History is Being Made, Just Not The Good Kind

Another day, another (several) bank failures in the making.

Just days after First Republic’s collapse, PacWest has found itself on the kill list. The regional bank, with ~$44B in assets and 70 branches, mostly in California, is considering strategic options, including selling itself.

Slim pickings: “There aren’t many potential buyers interested in the entire bank,” and the buyer might “book a big loss marking down some of its loans,” — per people familiar with the matter (BBG). Why buy the banks when bigger banks can pick them up for cheaper after they fail?

Some weak damage control

PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) dropped 51% and 39% yesterday, respectively — despite releasing statements after, trying to calm investors:

• PacWest said it hasn’t “experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank.”
• Western Alliance also said it didn’t see any “unusual deposit flows” after First Republic’s sale.

But that did little to calm skeptical investors — with short sellers increasing their bets against the weakest regional banks.

Those who made money from the recent bank collapses “are looking around to find another target,” — per Odeon Capital Group’s financial strategist (YF!).

That didn’t age well: On Monday, JPMorgan’s CEO Jamie Dimon said, “This part of the crisis is over.” On Wednesday, Fed Chair Jerome Powell also said the US banking system was “sound and resilient.”

But no chances are being taken. Yesterday, Canada’s second-largest bank, Toronto-Dominion (NYSE:TD), said it would terminate its $13.4B acquisition of regional bank First Horizon (NYSE:FHN) — sending $FHN down 33%.