Yahoo Finance PacWest (PACW) Gains 28.8% on Business Restructuring Efforts
Investors seem to be regaining confidence in PacWest Bancorp PACW stock, which jumped 28.8% over the last two days, as the company undertook strategic actions to focus on core community banking operations. Over the past two days, the company has announced the divestitures of its property lending division – Civic Financial Services ("CIVIC") – and real estate construction loan portfolio worth $2.6 billion.
The CIVIC unit has been sold to Roc Capital Holdings LLC, an integrated platform for residential real estate investors and a leading originator of business-purpose loans across the United States. The financial details of the transaction, which doesn’t include previously originated loans and loan servicing operations, have not been disclosed yet.
Additionally, per the regulatory filing, PACW signed an agreement with a wholly-owned subsidiary of Kennedy-Wilson Holdings, Inc. KW to sell 74 real estate construction loans worth $2.6 billion. Also, as part of the deal, the company will sell another six real estate construction loans with an outstanding principal balance of nearly $363 million to KW.
The completion of the sale of the loan portfolio is subject to customary closing conditions, including Kennedy Wilson’s satisfactory conclusion of the due diligence. The transaction is expected to close in multiple tranches in the second and early third-quarter 2023.
PacWest’s strategic initiatives are aimed at improving operational efficiency and exiting non-core businesses. It has been facing investors’ wrath since the collapse of Signature Bank and Silicon Valley Bank in March, which were seized by the regulators and sold to New York Community Bancorp, Inc. NYCB and First Citizens BancShares, Inc. FCNCA, respectively.
NYCB, through its bank subsidiary, Flagstar Bank, acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bank, while not buying any digital asset banking, crypto-related assets or the fund banking business. FCNCA assumed Silicon Valley Bank’s assets worth $110 billion, deposits worth $56 billion and loans worth $72 billion.
Investors seem concerned about PACW’s exposure to the tech and venture capital sector, the high level of uninsured deposits it had previously and huge unrealized bond losses still on its balance sheet.
While PacWest has been able to lower the number of uninsured deposits, the turmoil has brought forth new challenges. The regulators are expected to make capital provisions more stringent, resulting in a decline in profitability. This led the company to slash its quarterly dividend to 1 cent per share from 25 cents.
Commenting on the decision to cut dividend, CEO Paul Taylor said, “Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital to CET1 of 10%+.”
Though the company reiterated that the “business remains fundamentally sound,” cutting dividend is not a good sign.
Over the past three months, shares of PacWest have plunged 73.6% compared with industry’s decline of 46.2%.
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Currently, PACW stock carries a Zacks Rank # 5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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First Citizens BancShares, Inc. (FCNCA) : Free Stock Analysis Report
Kennedy-Wilson Holdings Inc. (KW) : Free Stock Analysis Report
New York Community Bancorp, Inc. (NYCB) : Free Stock Analysis Report
PacWest Bancorp (PACW) : Free Stock Analysis Report
