On Monday, a breath of fresh air entered the financial sector thanks to a cash injection from the sale of loans by PacWest Bancorp, a hard-hit bank stock. The sale of a loan portfolio after Ares Management Corp.’s closed its acquisition, generated an impressive $2 billion in cash that has ignited a positive reaction throughout the market.
As far as bank stocks go, PacWest Bancorp (PACW) is leading the charge with a 7% increase, with the KBW Nasdaq Bank Index following at 0.6% and the SPDR S&P Bank exchange-traded fund at a 1.2% increase. While there were a few larger bank stocks that faltered, the SPDR S&P Regional Banking ETF was up by 1.5%, indicating an overall good day for the banking industry.
According to Truist analyst Brandon King, this buoyant market sentiment is not surprising. The Ares deal has set a positive example that’s expected to motivate other banks currently facing liquidity and capital issues to pursue loan sales as well. In fact, the appetite from non-bank lenders at non-haircuts era is kept in mind.
As always in finance, there’s always a risk involved in such moves but current indicators suggest that PacWest Bancorp’s purchase may be the start of a positive trend in the industry.
Banking Stocks Experience Mixed Gains
Several banking stocks experienced gains recently, with Comerica Inc. up by 1.6%, East West Bancorp. Inc. and First Horizon Corp. both up by 1.8%, and Zions Bancorp up by 1.7%. The majority of these gains were seen in regional banks, while megabank stocks saw mixed results.
Goldman Sachs Group Inc. and Wells Fargo & Co. both experienced a drop of about 0.2%, whereas Bank of America Corp. increased by 0.9%, and JPMorgan Chase & Co. had a decrease of 0.7%. Meanwhile, Metropolitan Bank Holding Corp. experienced a 4.4% increase, Prosperity Bancshares Inc. saw a 1.5% increase, Citizens Financial Group Inc. saw an 0.8% increase, and Western Alliance Bancorp saw a 3.5% increase.
In anticipation of the Federal Reserve’s bank stress tests on Wednesday, investors wonder what the results will hold for regional banks.
