Western Alliance Bancorp stated on May 4 that there’s no truth to reports that it’s exploring a possible sale of some or all of its business or has hired an adviser to explore “strategic options.”
Shares of the bank plunged by 38 percent in regular trading, amid a broader regional bank stock rout.
“Western Alliance is not exploring a sale, nor has it hired an advisor to explore strategic options,” the bank stated.
Regional Bank Stocks Sink
Other regional lenders saw their shares fall on May 4.Zion Bancorporation, KeyCorp, Valley National Bancorp, and Comerica all fell by about 2.5 to 12 percent in regular trading. The SPDR S&P Regional Banking ETF shed 5.45 percent.
First Horizon shares tumbled by as much as 44 percent after the regional lender stated that it and Toronto-Dominion Bank had mutually agreed to terminate their merger agreement because of uncertainty around regulatory approvals.
Pacific Western Bank, a California-based regional lender, on May 4 confirmed rumors that it was exploring its “strategic options,” including a potential sale.
PacWest said in a statement that it had been approached by potential partners and investors and that “all options to maximize shareholder value” were on the table. News that PacWest was considering its options, including a possible sale, sent shares of the Los Angeles-based lender plunging by roughly 46 percent down.
The drop in shares of First Horizon, PacWest, Western Alliance, and their peers points to heightened uncertainty around the health of regional banks, despite statements by U.S. financial authorities that the banking sector remains in good health, regardless of a recent spate of failures.
Simmering in the background of the current banking sector turmoil is the feverish pace of interest rate hikes by the Federal Reserve in the face of persistently high inflation.
Deposit Outflows
Both PacWest and Western Alliance said in respective statements that they hadn’t experienced any unusual deposit outflows in the wake of the collapse of First Republic Bank, which was shut down by regulators and sold to JPMorgan Chase at the beginning of the week.The failure of First Republic, which had about $233 billion in total assets and $105 billion in total deposits as of the end of the first quarter, was the second-largest bank collapse in U.S. history.
“There may be another small one,” he noted, referring to the prospect of more bank failures. “But this pretty much resolves them all.
“This part of the crisis is over.”
In a similar tone, Federal Reserve Chairman Jerome Powell said on May 3 that the U.S. banking system remains “sound and resilient” despite experiencing some earlier “strains.”
Powell said the worst of the banking crisis appears to be over, but that Fed economists would be closely monitoring the economic effects of the turmoil.
There’s been concern about the knock-on effects of the banking crisis, including a credit crunch that could weigh on economic activity and hiring.
Former Federal Reserve Bank of Dallas President Robert Kaplan said the regional banking crisis may be more serious than commonly believed and called for the Fed to pause its rate-hiking cycle to give policymakers more time to address the risks.
“I’d prefer to do what’s called the hawkish pause, not raise but signal that we are in a tightening stance, because I actually think the banking situation may well be more serious than we currently understand,” Kaplan said.
The former Fed official’s remarks came ahead of the much-anticipated Federal Open Market Committee (FOMC) policy meeting, which on May 3 concluded with a decision to raise interest rates by another quarter point.
The May 3 25 basis-point increase in the benchmark federal funds rate puts it within a range of 5 to 5.25 percent.
