PacWest Bancorp severely missed estimates for Q1 earnings early Thursday as it felt the impact from the recent bank panic. But the Los Angeles-based bank noted deposits have stabilized and it has sufficient liquidity. Meanwhile, Blackstone wants to become the middleman for regional banks and insurance companies, to help offload risk and collect finders fees. Western Alliance issued a deposit update shortly after the market opened.
PacWest stock dove Thursday and led regional bank shares lower, showing that investors are still unsure about just how far the string of recent bank failures might run.
PacWest reported a loss of $10.22 per share for the quarter, compared to earnings of $1.01 per share in 2022. Adjusted earnings for the quarter were 66 cents per share. Analysts expected a loss of 61 cents per share. Net revenue slid 4.6% to $318.2 million. Analysts polled by FactSet saw revenue at $318.9 million.
Total deposits were $28.2 billion as of March 31, compared to $33.9 billion in Q4 and $33.2 billion last year, respectively. The bank reported deposits stabilized in late March and rebounded by $700 million in early April.
Total insured deposits jumped to 73% as of April 24 from 48% at year-end.
Net interest income fell to $279 million, down 9.7% from 2022 and 13.6% from year-end.
PacWest Liquidity
PacWest noted that its stock price tumbled 41.5% from April 28 to May 5 following the closure and sale of First Republic Bank to JPMorgan Chase. Deposits sank by 9.5% for the week ending May 5 after reports that PacWest was exploring strategic options on May 3.
However, PacWest has more than enough liquidity on its balance sheet to cover uninsured deposits. As of May 10, total immediately available liquidity was $15 billion compared to $5.2 billion in uninsured deposits. The bank's coverage ratio currently stands at a solid 288%.
PacWest increased its borrowings by $10.1 billion in the first quarter to $11.88 billion as the bank bolstered its balance sheet. PacWest secured $4.9 billion from the new federal Bank Term Funding Program and $4.2 billion in secured advances from the Federal Home Loan Banks, as well as $1.4 billion from a new repurchase agreement facility. Additional available borrowing capacity was $5.8 billion as of March 31.
PacWest's provision for credit losses was $3 million for Q1, compared to $10 million in Q4. Last year PacWest recorded a benefit of $7 million for the quarter.
Blackstone Discusses Regional Bank Loans
Meanwhile, alternative asset manager Blackstone is discussing potential partnerships with regional banks, where they make loans that Blackstone funnels to its insurance clients, the Financial Times reported early Thursday. Blackstone is in talks with lenders with $100 billion to $250 billion in assets but president Jon Gray declined to name those involved.
Under the proposal, insurers pay Blackstone a fee for directing the assets and they would hold the debt to maturity. The Financial Times quoted Gray saying firms like Blackstone can help offload some of the risk for regional banks after a loan is securitized, according to FT.
Western Alliance Deposit Update
Western Alliance noted it had "stable deposits" in an update Thursday shortly after the opening bell. The bank's deposits rose to $49.4 billion as of May 9, increasing by $600 million from May 2 and improving from $47.6 billion as of March 31. Western Alliance said insured deposits represented 79% of total deposits as of May 9, compared to 68% as of March 31. The bank's readily available liquidity is "approximately double" the amount of uninsured deposits as of May 9, according to Wester Alliance. The bank maintained its guidance to increase deposits by $2 billion quarter-over-quarter.
Last Thursday, Western Alliance denied reports it was exploring its own potential sale after a Financial Times story sent the stock spiraling.
Bank Stocks
PacWest stock carved 22.7% lower Thursday following results. Shares dived 83.3% over the past three months as the bank panic unfolded.
Western Alliance shares slid 2% Thursday and flirted with turning positive following the update after retreating as much as 9% before the opening bell. The stock is down 64.5% the last three months.
The SPDR S&P Regional Banking ETF edged down 2.4% by the closing bell.
Blackstone stock inched up 0.85% in Thursday trading following its news.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
