PacWest sale rumors cause regional bank share drop

Shares of regional banks took a hit on Thursday morning following the announcement that PacWest was exploring options to strengthen its finances, including a potential sale and the sale of some assets. The mid-sized lender said that it had not seen an "outsized flow" in deposits and that it would continue to evaluate all options to maximize shareholder value. PacWest's stock plunged nearly 47% from Wednesday evening, with other regional bank shares also dropping. This comes less than a week after the collapse of First Republic, a San Francisco-based bank that catered to the wealthy, which was seized by federal regulators and sold to JPMorgan Chase. Both JPMorgan CEO Jamie Dimon and Federal Reserve Chairman Jerome Powell expressed confidence this week that the worst volatility in the financial sector is over. Mid-sized banks are struggling, in part, from higher interest rates, which the Fed raised rapidly over the past year from near zero to more than 5%. The turmoil began in early March with the collapse of Silicon Valley Bank and Signature Bank, which faced massive losses on long-term securities that had tumbled in value due to higher interest rates. When depositors panicked, a bank run ensued. Within days, US regulators took extraordinary steps to contain the fallout from the bank's collapse and shore up wavering confidence in the financial system, including protecting all deposits at the two institutions – even those holding funds that exceeded the FDIC's $250,000 insurance limit. The Fed also launched a new emergency backstop for lenders to help them meet deposit withdrawals under favorable terms.