Mixed Regional Bank Stocks; PacWest Soars After Dividend Cut

(CTN News) – Stocks of battered Regional Bank Stocks rallied premarket Monday, continuing their Friday rally to recoup some of the losses caused by First Republic Bank’s failure last week.

Following its 82% rocket Friday, PacWest Bancorp led the charge early on Monday. Prior to the opening bell, Zions ranked among the top performers of the S&P 500 index.

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 Dividends are slashed at PacWest

PacWest Bancorp (PACW) shares surged 19% early Monday after the bank slashed its dividend late Friday in order to preserve capital. It was announced late Friday that PacWest had reduced its dividend to 1 cent per share from 25 cents per share in the previous quarter.

As a result of Regional Bank Stocks economic uncertainty, volatility in the banking industry, and the possibility of regulatory changes to capital requirements, PacWest CEO Paul Taylor described the cut as a “prudent step.” According to Taylor, the company’s business remains fundamentally sound.

Friday, PACW stock soared 82% higher, trimming its weekly loss to 43%. Following reports that PacWest was exploring strategic options, including the possibility of a sale, the bank collapsed on Wednesday. So far this year, the stock of PACW has declined by approximately 70%.

Regional Bank stocks regional markets

Monday was a quiet day for regional bank stocks.

It added 3.2% to its 50% rise from Friday as Western Alliance (WAL) rose 3.2%. Shares in WAL fell roughly 60% Thursday following unconfirmed reports that the Phoenix-based bank was considering selling itself.

In response to the article, Western Alliance denied the claims, calling them “categorically false in every respect.” The bank intends to take legal action.

As part of the S&P 500, Comerica (CMA) reduced its premarket advance and fell about 1% in early trading Monday morning, after jumping 16.8% last week.

Zions Bancorp (ZION) shares also rose in response to PacWest’s gains. Friday, ZION’s stock climbed 19.2% and rose 3% early Monday morning.

After reversing premarket gains, KeyCorp (KEY) shares dropped less than 1% at the opening bell.

In addition, U.S. Bancorp (USB) reversed lower Monday morning following a 6% gain on Friday.

SPDR S&P Regional Bank Stocks ETF (KRE) fell 0.3% after Monday’s opening bell. Regions Financial (RF), Truist Financial (TFC), WAL and PACW are all included in KRE.

Yellen warns about the debt ceiling

Moreover, the SEC Chair Gary Gensler put bank stock investors on notice Thursday when he pledged to investigate and prosecute “any misconduct that might threaten investors,” following the American Bankers Association’s call for an investigation into short sellers profiting from the panic.

In addition, a June 1 deadline for resolving the debt ceiling debate looms over the economy. This is a political threat amplified by the fragility of the banking sector.

As Treasury Secretary Janet Yellen stated on Sunday, failure to suspend or lift the debt ceiling would result in an “economic and financial catastrophe that we will have Regional Bank Stocks created for ourselves.”

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