Shares of Pacific Western Bank fell again on May 10 after the lender confirmed it continued to see deposit outflows of nearly 10 percent in the first week of the month.
“PacWest funded this decline in deposits with available on-balance sheet liquidity,” it noted.
The bank added that as of May 10, it has $15 billion of available liquidity, which exceeds the $5.2 billion in uninsured deposits by around 288 percent.
Shares of PacWest were down 20.9 percent as of the time of writing.
Deposit Turnaround
The latest disclosure from PacWest marks a stark contrast to an update issued by the bank on May 4, when it said it “has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news,” and that core customer deposits had increased since the end of March.At the time, PacWest said it had a total of $28 billion in deposits as of May 2, of which 75 percent were insured. It also noted that its cash and available liquidity remained “solid and exceeded our uninsured deposits.”
Thursday’s filing also showed that PacWest’s total deposits declined 16.9 percent, or by $5.7 billion, during the three months that ended March 31, driven primarily by a decrease in retail non-maturity deposits and wholesale non-maturity deposits, although that was offset slightly by an increase of $2.2 billion in time deposits—that is, those with a specific maturity date.
Shares of PacWest were already down more than 50 percent this month, which the bank in Thursday’s filing attributed to the closure of First Republic Bank by regulators earlier this month, adding that this had “heightened market and customer fears of additional bank failures,” including its own.
‘Increased Risks, Uncertainties’
“These recent events, and the ongoing news coverage of these events, has increased certain risks and uncertainties related to our business and future prospects,” the bank said in its latest filing.In response to ongoing risks and the potential prospect of increased deposit outflows, the bank said it has pledged an additional $5.1 billion of its loans to the Federal Reserve, which has resulted in an additional borrowing capacity of $3.9 billion.
Rick Meckler, a partner at Cherry Lane Investments, said PacWest’s announcement that it has $15 billion of available liquidity to cover uninsured deposits is reassuring, however, he pointed to previous instances in which banks have reassured investors of their stability only to later fail.
Carpenter pointed to increasing monetary tightening by the central bank, noting that “a lot of what’s going on is exactly what you should have thought you were trying to do as a policymaker.”
“Is there an additional exogenous component? I think therein lies the real question of what could go wrong,” he added.