Traders work on the floor of the New York Stock Exchange (NYSE), May 3, 2023.
Brendan McDermid | Reuters
PacWest’s stock was rebounding on Friday.
However, Friday’s rally made only a small dent in the week-to-date losses. PacWest still finished the week down 43% and below its closing level from Wednesday. The bank confirmed this week that it is exploring strategic options.
Western Alliance, which said it is not seeking a sale, has also been under heavy pressure this week, falling 27% even after Friday’s rally. The KRE finished the week down about 10%.
The steep declines, which came even at banks that reported much smaller deposit outflows than First Republic, led Wall Street analysts to warn that the stocks have become detached from their fundamentals.
“We are arguably reaching a point of hysteria,” Fundstrat strategist Tom Lee said in a note to clients on Friday.
Analysts at JPMorgan Chase upgraded Western Alliance, Zions and Comerica to overweight on Friday, saying the bank stocks “appear substantially mispriced to us.”
This week’s slide came after First Republic was seized by regulators and sold to JPMorgan Chase before the market opened on Monday. JPMorgan CEO Jamie Dimon and Federal Reserve Chair Jerome Powell, among others, have said this week that they think the stage of banking crisis caused by deposit outflows is largely over, but the fall for the stocks shows investors are less confident.
Many on Wall Street are looking to Washington for regulatory changes to calm the banking system, such as potentially expanding deposit insurance rules. Some have raised the possibility of temporarily banning short-selling on bank stocks. Former Federal Deposit Insurance Corporation Chair Sheila Bair told CNBC’s “The Exchange” on Thursday that some of the share price declines are likely being driven by short-selling.
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