Teetering regional lender PacWest Bancorp saw its shares jump as much as 24% on Monday to guide a recovery within the battered US banking sector.
The rebound comes after Los Angeles-based PacWest announced a pointy cut to its quarterly dividends with a purpose to construct capital in a late Friday update. Dividends were cut to only one penny per share — down 96% from 25 cents per share within the previous quarter.
PacWest CEO Paul Taylor reassured investors after the Friday announcement that “business stays fundamentally sound.”
“Given current economic uncertainty, recent volatility within the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to speed up our plans to construct capital,” Taylor said.
The bank shares spiked 24% after Monday’s opening bell, but dipped to a ten% spike at 11 am ET. The stock stays down roughly 75% 12 months so far.
Other US regional banks also gained as investors tiptoed back into the sector. Peers Western Alliance Bancorp surged 11% and Comerica Inc climbed 7%, while Zions Bancorp rose 9%.
Los Angeles-based PacWest announced that dividends were cut 96% to 1 cent per share.Getty Images
The jumps function hope of possible recovery because the US banking sector struggles to get better from the collapse of First Republic Bank on May 1 — the country’s third major bank to fail in two months.
Over the weekend, billionaire Warren Buffett, whose views are closely watched by investors, said his conglomerate Berkshire Hathaway was cautious across the banking sector.
The “very poor” messaging from politicians, regulators and the press across the bank failures had unnecessarily frightened depositors, Buffett said.
As of Monday’s opening bell, PacWest shares are up 21%.Getty Images
Since Silicon Valley Bank collapsed in March, several lenders have been issuing regular updates on deposits and liquidity to drive confidence in customers and shareholders.
For the week ended April 26, deposits at small banks totaled $5.32 trillion, down just 0.5% from per week earlier, in accordance with data from the Federal Reserve.