However, another American bank is on the verge of collapse

However, another American bank is on the verge of collapse
FinancialMay 4 ’23 19:37Edited May 4 ’23 20:21authors: Bram van Eugendhoven and Remy Cook

Another US bank is on the brink of collapse, this time involving mid-sized Bacoist Bank. Although the latest quarterly numbers have been positive, it seems that investors have completely lost faith in the bank. The stock opened more than 45 percent in minus on the American Stock Exchange.

According to stock market analyst Corné van Zeijl of Actiam Asset Management, there is a good chance that PacWest will become the fourth US bank to collapse in a short time, after the previous collapses of Silicon Valley Bank, Signature Bank and First Republic Bank. According to him, there is an important difference with the First Republic Bank, which was the last to collapse. When First Republic came up with its numbers, it turned out that a lot of savers had left. But numbers provided by PacWest over a week ago showed there was almost no outflow. That was very good.’

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Despite this, now it seems that investors have lost confidence in the bank, as evidenced by the sharp drop in prices on the American stock exchange. “Now you mainly see a fear among investors that as shareholders you would have nothing left if the bank collapsed, and that only the savers would be bailed out,” van Zijl says. “But if you’re a PacWest saver and you see the price drop like that, you also wonder if things are going well. For example, imperfect investors turn into savers, and that can cause the bank to collapse.

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disorders

As long as the savers stay, van Zijl explains, there’s really nothing wrong. Since the introduction of the positive quarterly numbers at the end of April and the current turmoil, nothing has really happened at the bank that would explain the fears you are now experiencing among investors. However, PacWest itself doesn’t seem comfortable with the situation. “They see that as a small bank they can’t continue like this, so they are looking for an acquisition.”

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PacWest’s problems are unlikely to cause as much turmoil in the banking world as the collapse of Silicon Valley Bank and First Republic Bank. They both had about 200 billion US dollars on the balance sheet, and this is “only” about 40 billion US dollars. It is an essential signal that the banking crisis is far from over, which is what we expected after First Republic. This drop in rates indicates that there is a lot of turmoil going on, even if it’s just a small bank.

Two options

According to Jochem Visser of BNR Beurs, there are two options for PacWest: either there will be consultations this weekend between organizers and potential buyers, as is the case with First Republic, or a savior will be found in a day and a half who will be willing to make a wall of money available. adjust,” he says.

But according to Visser, the second option has little chance. “But the bank itself is optimistic about this,” he continues. For example, they insist that 70% of their deposits are insured, while this was not the case at Silicon Valley Bank, for example. But yeah, that basically means 30 percent are uninsured.

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structural

However, it is not a structural solution. According to Visser, the acquisition of regional banks cannot continue with large banks. JPMorgan Chase already needed special permission to acquire more than ten percent of deposits in the United States, Visser says. “It had to be done outside the rules.”

Another US bank is on the brink of collapse, this time involving mid-sized Bacoist Bank. Although the latest quarterly numbers have been positive, it seems that investors have completely lost faith in the bank. The stock opened more than 45 percent in minus on the American Stock Exchange. (unsplash)

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