Regional banks rally after getting hammered last week
Regional banks continued to rally on Monday and shook off the steep market losses they experienced last week.
PacWest shares closed up 3% on Monday while Zions rose 2%. Regional bank shares began their recovery on Friday. The rebound comes after midsize lenders saw their shares nosedive following the sudden collapse of Silicon Valley Bank and Signature Bank, and more recently with JPMorgan Chase's emergency takeover last week of First Republic Bank.
Despite the recent turbulence in banking, PacWest "remains fundamentally sound," CEO Paul Taylor said Friday in announcing that the $44 billion asset-based lender would cut its quarterly dividend.
Shares of PacWest, Western Alliance and other regional banks slumped after California regulators seized First Republic on May 1, as customers rushed to withdraw $100 billion from the Los Angeles lender. The Federal Deposit Insurance Corporation then sold most of First Republic's assets to JPMorgan.
After the First Republic move, investors worried that other regional banks could suffer the same fate, fueling concerns about the companies' prospects. With its stock price tumbling, PacWest said last week it was exploring a possible sale.
Still, Wall Street analysts noted that PacWest is in solid financial shape and does not share the same attributes that made SVB and First Republic vulnerable to a bank run. Notably, PacWest has far less in uninsured deposits, or client funds in excess of the $250,000 account cap guaranteed by the U.S., than SVB did when it capsized.
"The vast majority of banks are safe and sound, and there remains no safer place to keep your money than in a U.S. bank," the American Bankers Association (ABA) told CBS MoneyWatch on Monday.
Rob Nichols, the ABA's CEO, told Yahoo Finance on Monday that there has been recent turmoil among regional lenders, but "when you look at the recent earnings, when you look at the fundamentals, they are in solid shape."
"I'm excited to see the rebound in some of these stocks," Nichols said. "When you look at the recent earnings and the fundamentals, they're doing well. These midsize banks, these small regional banks are incredibly important for the U.S. economy. They serve incredibly important communities and businesses and individuals."
Even with assurances from banking experts, some customers remain concerned. About half of U.S. adults said they're worried about how safe their money is in a bank, according to a Gallup poll published last week.
Khristopher J. BrooksKhristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
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