Uncertainty Over Mass Withdrawals Rocks Regional US Banks

Anxiety continued to plague the regional banks of the United States in the face of the possibility of massive withdrawals, while PacWest Bancorp tried to calm the spirits after its shares plunged more than 39%.

PacWest announced Thursday that it was considering selling assets, that several companies have proposed a deal to it and that negotiations are ongoing. The bank insisted that there have been no massive withdrawals following the collapse and sale of First Republic Bank.

But uncertainty permeated other regional banks on Thursday. The actions of Zions Bancorp plummeted more than 11%, those of commercial more than 8%, and keycorp they fell more than 7%.

TD Bank Group and First Horizon Corp. said on Thursday they had canceled plans for a merger, citing regulatory hurdles. Toronto Dominion Bank announced in February that it would buy regional bank First Horizon for $13.4 billion in cash.

The deal was under intense scrutiny given recent circumstances in the banking sector, and TD Bank has large operations in the United States.

The actions of First Horizon they fell more than 42% before the markets opened on Thursday.

Several banks have been destabilized by the recent actions of the Federal Reserve in its effort to fight inflation. The US central bank on Wednesday raised its benchmark interest rate by a quarter point, to its highest level in 16 years, as part of that effort, its 10th straight hike.

The head of the central bank, Jerome Powell, warned that the institution is monitoring several factors, including the turbulence in the banking sector.

Powell emphasized his belief that the collapse of three large banks in the past six weeks is likely to lead other banks to tighten lending, which will help fight inflation.

“Banks have endured a turbulent environment in the past two months and uncertainty lingers in the smaller sector of regional banks“, said JPMorgan in a note to clients. The firm predicted further pressure on bank shares due to regulatory and economic uncertainties, among other factors.

Source: Associated Press