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PacWest (PACW) Cuts Dividend to Build Capital Amid Crisis
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PacWest Bancorp , which finds itself at the center of the current banking crisis, has slashed its quarterly dividend to 1 cent per share from 25 cents. Following the initial euphoria that sent the stock up almost 40% in pre-market trading yesterday, PACW shares closed just 3.7% above Friday’s price.
Commenting on the decision to cut dividend, CEO Paul Taylor said, “Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital to CET1 of 10%+.”
Though the company reiterated that the “business remains fundamentally sound,” cutting dividend is not a good sign.
Since the start of the present regional banking crisis in March (leading to four bank collapses), PacWest has been one of the hardest-hit regional bank stocks. Investors seem concerned about the company’s exposure to the tech and venture capital sector, the high level of uninsured deposits it had previously and huge unrealized bond losses still on its balance sheet.
Similarly, several other regional banks like Western Alliance Bancorporation (WAL - Free Report) , Comerica (CMA - Free Report) and Zions Bancorporation (ZION - Free Report) are facing investor wrath over high exposure to particular loan portfolios and substantial unrealized bond losses in their balance sheet. Hence, shares of WAL, CMA and ZION have tanked since March 2023 over investors’ pessimistic stance.
While PacWest has been able to lower the number of uninsured deposits, the turmoil has brought forth new challenges. The banking regulators are expected to make capital provisions more stringent, which will lead to a decline in profitability in the near term. These concerns have led the company to seek strategic options, including sale or capital raise.
Shares of PACW have lost substantial value since the regional banking crisis started in March. So far this year, the shares of this Zacks Rank # 5 (Strong Sell) company have plunged 74% compared with a 41.5% decline for the industry it belongs to.
Image: Bigstock
PacWest (PACW) Cuts Dividend to Build Capital Amid Crisis
PacWest Bancorp , which finds itself at the center of the current banking crisis, has slashed its quarterly dividend to 1 cent per share from 25 cents. Following the initial euphoria that sent the stock up almost 40% in pre-market trading yesterday, PACW shares closed just 3.7% above Friday’s price.
Commenting on the decision to cut dividend, CEO Paul Taylor said, “Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital to CET1 of 10%+.”
Though the company reiterated that the “business remains fundamentally sound,” cutting dividend is not a good sign.
Since the start of the present regional banking crisis in March (leading to four bank collapses), PacWest has been one of the hardest-hit regional bank stocks. Investors seem concerned about the company’s exposure to the tech and venture capital sector, the high level of uninsured deposits it had previously and huge unrealized bond losses still on its balance sheet.
Similarly, several other regional banks like Western Alliance Bancorporation (WAL - Free Report) , Comerica (CMA - Free Report) and Zions Bancorporation (ZION - Free Report) are facing investor wrath over high exposure to particular loan portfolios and substantial unrealized bond losses in their balance sheet. Hence, shares of WAL, CMA and ZION have tanked since March 2023 over investors’ pessimistic stance.
While PacWest has been able to lower the number of uninsured deposits, the turmoil has brought forth new challenges. The banking regulators are expected to make capital provisions more stringent, which will lead to a decline in profitability in the near term. These concerns have led the company to seek strategic options, including sale or capital raise.
Shares of PACW have lost substantial value since the regional banking crisis started in March. So far this year, the shares of this Zacks Rank # 5 (Strong Sell) company have plunged 74% compared with a 41.5% decline for the industry it belongs to.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research