Stocks Of Pacwest Bank Fall More Than 20% As Regional Banks Hit New Lows

On Tuesday, regional bank stocks experienced a significant decline due to the continued impact of the third major bank failure this year, putting pressure on the sector. Shares of PacWest fell almost 28% and were halted for volatility multiple times, marking the fourth-straight negative session. 

‍

Additionally, Western Alliance shares dropped 15%, while the SPDR S&P Regional Banking ETF (KRE) sank 6.3%. 

‍

The weekend seizure of First Republic, a troubled regional bank, by JPMorgan Chase further exacerbated the losses. 

‍

This marks the third failure of a large regional bank this year, following Silicon Valley Bank and Signature Bank in March. Although the reasons for Tuesday’s declines were not immediately clear, the recent bank failures and expected regulatory changes in response to them have raised questions about the long-term profit outlook for mid-sized regional banks. 

‍

Another issue for regional banks is the possibility of more Fed rate hikes, which will make it more costly for banks to hold on to their deposits while also lowering the market value of the long-dated bonds and loans on their books. The central bank is expected to raise its benchmark rate by 0.25 percentage points on Wednesday.

‍