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Since March, the following banks have collapsed or have been sold for pennies on the dollar: Signature Bank of New York ((SBNY - Free Report) ), Silvergate Capital (), Silicon Valley Bank (SIVB),First Republic (FRC), and Credit Suisse (). Though Fed Chairman Jerome Powell called the U.S. banking system “strong” a week and a half ago, clearly, markets disagree. Unfortunately for Powell, he has no real choice in the matter – if he calls the banking system weak, it will induce more bank runs and withdrawals.
PacWest Company Overview
PacWest Bancorp () is a Los Angeles-based bank holding company with one wholly-owned banking subsidiary, Pacific Western Bank. The company provides commercial banking services, including real estate, construction and commercial loans, and comprehensive deposit and treasury management services to small and medium-size businesses.
Is PacWest the Next Domino to Fall?
In the fourth quarter of 2022, PACW experienced withdrawals of roughly $5 billion. Since then, deposits have stabilized. However, any way you spin it, PacWest’s first quarter earnings announcement was disappointing, to say the least. Earnings growth slowed by 35% versus last year. Though the company reported adjusted earnings of $0.66 per share, non-adjusted earnings careened lower to a loss of $10.22 a share.
Beyond the fluctuations in deposits held and the negative earnings trajectory, one of the biggest concerns for investors is the skyrocketing debt of the company. In 2023 alone, the debt-to-equity ratio has skyrocketed by more than 400%.
Image Source: Zacks Investment Research
Though PacWest is currently solvent, one primary concern is the current narrative in the regional banking sector. As customers see regional banking stocks tanking, they may shift their money to larger “household” banking names such as JP Morgan ((JPM - Free Report) ) or Bank of America ((BAC - Free Report) ). In other words, the narrative around the company and its falling stock price may trigger a self-fulfilling phenomenon.
Technical View
PacWest’s price action is the definition of relative weakness. Over the past twelve months, PACW has underperformed 99% of its peers. The stock remains steeped in a downtrend, and until it can get back over the 50-day moving average, it should be considered an avoid.
Image Source: Zacks Investment Research
Conclusion
PacWest is a bank at the heart of the current regional banking crisis. PACW suffers from soaring debt, lackluster earnings, and abysmal price action. Barring any government or FDIC intervention, investors should avoid the stock.
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Bear of the Day: PacWest Bancorp (PACW)
Regional Banking Contagion
Since March, the following banks have collapsed or have been sold for pennies on the dollar: Signature Bank of New York ((SBNY - Free Report) ), Silvergate Capital (), Silicon Valley Bank (SIVB), First Republic (FRC), and Credit Suisse (). Though Fed Chairman Jerome Powell called the U.S. banking system “strong” a week and a half ago, clearly, markets disagree. Unfortunately for Powell, he has no real choice in the matter – if he calls the banking system weak, it will induce more bank runs and withdrawals.
PacWest Company Overview
PacWest Bancorp () is a Los Angeles-based bank holding company with one wholly-owned banking subsidiary, Pacific Western Bank. The company provides commercial banking services, including real estate, construction and commercial loans, and comprehensive deposit and treasury management services to small and medium-size businesses.
Is PacWest the Next Domino to Fall?
In the fourth quarter of 2022, PACW experienced withdrawals of roughly $5 billion. Since then, deposits have stabilized. However, any way you spin it, PacWest’s first quarter earnings announcement was disappointing, to say the least. Earnings growth slowed by 35% versus last year. Though the company reported adjusted earnings of $0.66 per share, non-adjusted earnings careened lower to a loss of $10.22 a share.
Beyond the fluctuations in deposits held and the negative earnings trajectory, one of the biggest concerns for investors is the skyrocketing debt of the company. In 2023 alone, the debt-to-equity ratio has skyrocketed by more than 400%.
Image Source: Zacks Investment Research
Though PacWest is currently solvent, one primary concern is the current narrative in the regional banking sector. As customers see regional banking stocks tanking, they may shift their money to larger “household” banking names such as JP Morgan ((JPM - Free Report) ) or Bank of America ((BAC - Free Report) ). In other words, the narrative around the company and its falling stock price may trigger a self-fulfilling phenomenon.
Technical View
PacWest’s price action is the definition of relative weakness. Over the past twelve months, PACW has underperformed 99% of its peers. The stock remains steeped in a downtrend, and until it can get back over the 50-day moving average, it should be considered an avoid.
Image Source: Zacks Investment Research
Conclusion
PacWest is a bank at the heart of the current regional banking crisis. PACW suffers from soaring debt, lackluster earnings, and abysmal price action. Barring any government or FDIC intervention, investors should avoid the stock.