PacWest lost 20% of deposits amid bank turmoil

PacWest Bancorp said it lost 20 per cent of its deposits so far this year but that it had shored up its access to cash by raising $1.4bn via a lending facility from Apollo-backed investment firm Atlas SP Partners.

PacWest’s deposits had fallen to $27.1bn as of Monday from $33.9bn at the end of 2022, the Beverly Hills-based bank said in a statement on Wednesday. Nearly two-thirds of its deposits were covered by a US government-backed insurance programme and the bank had more cash on hand than it did uninsured deposits.

“As we look ahead, we have continued confidence in the strength of PacWest and are encouraged by the stability we have seen in our deposits and liquidity over the past week,” chief executive Paul Taylor said in a statement.

PacWest is one of a handful of West Coast regional banks that came under siege after the failure of Silicon Valley Bank earlier this month. Depositors in several midsized banks were hit with significant outflows this month after nearly $200bn in deposits at SVB were put at risk because they were not guaranteed by the US government.

Banking regulators ultimately agreed to backstop depositors at SVB and US Treasury secretary Janet Yellen has since said guarantees offered to depositors in the failed SVB could be replicated at other institutions.

PacWest shares were trading down about 3.2 per cent in early New York trading on Wednesday, while the broader KBW Bank index was down about 0.8 per cent. PacWest shares are down more than 50 per cent this month.

The deal with Atlas, an asset-backed financing facility, is part of a raft of steps the bank said it had taken to bolster its access to funding as several US regional banks grapple with the fallout of SVB’s collapse.

PacWest has drawn on government lending programmes, borrowing $3.7bn from the Federal Home Loan Bank and $10.5bn from the Federal Reserve’s discount window, seen as the two lenders of last resort to US banks.

PacWest also said it was now offering depositors higher rates, raising the interest rates offered on deposits to just over 2 per cent, from 1.71 per cent at the end of last year.

PacWest said it had explored a capital raise with potential investors, but the company “determined it would not be prudent to move forward with a transaction at this time”.

Taylor said PacWest was encouraged by the messaging from government officials, including that by Yellen on Tuesday.

Despite the deposit outflows, PacWest said it had also opened about 130 new accounts in its venture capital business since March 9, the day when deposits started to flow out of SVB.

Atlas SP is the new venture formed by Apollo earlier this year after it purchased a majority stake in Credit Suisse’s securitised products business.