PacWest Bancorp Shares Surge by 19% After Dividend Cut
PacWest Bancorp, a bank holding company headquartered in Los Angeles, California, saw its shares surge by 19% early on Monday after the company announced that it would be cutting its dividend from 25 cents per share in the previous quarter to just 1 cent per share. The move was seen as a prudent step to preserve capital and accelerate plans to build up its CET1 capital ratio to 10% or more, given current economic uncertainty, recent volatility in the banking sector, and potential changes in regulatory capital requirements. PacWest CEO Paul Taylor reassured investors that the bank’s businesses remain fundamentally sound.
The announcement of the dividend cut on Friday had sent PacWest shares soaring by nearly 82% in the previous trading session, and on Monday, the shares jumped another 20%, adding to the previous day’s gains. The bank’s stock had suffered steep losses in the past week following the announcement of the sale of First Republic to JPMorgan Chase & Co. However, the dividend cut was seen as a positive step to strengthen the company’s balance sheet and ensure its long-term viability.
PacWest Bancorp is a relationship-based community bank that provides business banking and treasury management services to small, middle-market, and venture-backed businesses. The bank offers a broad range of loan and deposit products and services through full-service branches throughout California and in Durham, North Carolina, and Denver, Colorado, as well as loan production offices around the country.
In addition to the dividend cut, the company’s Board of Directors also declared a quarterly cash dividend of $0.01 per common share payable on May 31, 2023, to stockholders of record at the close of business on May 15. The bank also declared a quarterly cash dividend of $0.4845 per depositary share on its 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, payable on June 1 to stockholders of record as of May 15, 2023.
Despite the challenges faced by the bank due to the pandemic and low-interest rates, PacWest Bancorp’s CEO and President, Paul Taylor, remains optimistic about the bank’s prospects. He emphasized that the bank’s business model remains fundamentally sound, and the company will continue to focus on its relationship-based community banking model.
In conclusion, PacWest Bancorp’s dividend cut was a prudent step to preserve capital and build up its CET1 capital ratio to 10% or more. The move was well-received by investors, as evidenced by the significant jump in the bank’s stock price. While the pandemic and low-interest rates continue to impact the bank’s earnings, PacWest Bancorp remains committed to its relationship-based community banking model and is optimistic about its long-term prospects.
0. “Regional US banks rebound for a second day as PacWest cuts dividend, says business ‘fundamentally sound’” Forex Factory, 8 May. 2023, https://www.forexfactory.com/news/1219476-regional-us-banks-rebound-for-a-second-day
1. “PacWest Bancorp Announces Quarterly Dividends” Yahoo Life, 6 May. 2023, https://www.yahoo.com/lifestyle/pacwest-bancorp-announces-quarterly-dividends-020000166.html