PacWest Bancorp shifted from being the worst performer on Tuesday in the KBW Regional Banking Index to being the best, as the beaten-down bank stock swung with volatility continuing to grip the shares and the sector.
(Bloomberg) — PacWest Bancorp shifted from being the worst performer on Tuesday in the KBW Regional Banking Index to being the best, as the beaten-down bank stock swung with volatility continuing to grip the shares and the sector.
PacWest rose 2.4% on Tuesday, erasing earlier declines of as much as 10%.
The bounce pushed the stock to gain for a third day, extending an advance that included a record rally of 82% on Friday. The KBW Regional Banking Index pared an earlier drop to close lower by 0.7%.
Regional bank stocks have broadly been under pressure since the collapse of peers including Silicon Valley Bank and Signature Bank.
Investors have been unnerved by a rash of deposit outflows from banks and increasing concerns about general stability. Concerns around longer-term pressures such as surging funding costs and potential regulatory tightening have also weighed on the banking sector.
First Republic Bank’s failure early last week further stoked the volatility in bank shares with the KBW Regional Banking Index falling 11% since then.
California’s financial regulator said it will boost scrutiny of banks with assets over $50 billion.
“We believe this recent stock reaction is overdone as there is currently no evidence of accelerating deposit outflows,” Morgan Stanley analyst Manan Gosalia wrote.
“We see accelerating deposit costs, not accelerating deposit outflows, as the most significant headwind for the Midcap Banks over the next several quarters.”
Some analysts say the tumbling stock prices have become disconnected from the companies’ fundamentals.
“We recognize the potential challenges for the banks as the year progresses, but we also believe they are generally managing these headwinds quite well,” RBC Capital Markets analyst Jon Arfstrom wrote in a Tuesday note.
“We believe that valuations are attractive given the sharp pull-back in stock prices in recent weeks, particularly when contrasted against the reasonable fundamental outlooks.”
–With assistance from Max Reyes.
(Updates trading and chart to market close.)
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