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PacWest secures $1.4 billion in cash from Atlas after deposits drop 20%

PacWest Bancorp said it has lost 20% of its deposits this year but has stepped up access to cash by raising $1.4 billion through a line of credit from Apollo-backed investment firm Atlas SP Partners.

PacWest deposits fell to $27.1 billion as of Monday from $33.9 billion at the end of 2022, the Beverly Hills-based bank said in a statement Wednesday. Nearly two-thirds of its deposits were covered by U.S. government-backed insurance programs, and banks had more cash on hand than uninsured deposits.

“Looking ahead, we remain confident in PakWest’s strength and encouraged by the stability of deposits and liquidity over the past week,” CEO Paul Taylor said in a statement. Stated.

The new funding arrangements will increase the banks’ ability to repay depositors who seek to withdraw their funds, but they will not improve the overall financial position that has been dragged down by losses in their bond portfolios.

pak west It is one of the few West Coast regional banks to come under siege after the failure of Silicon Valley Bank earlier this month. Depositors at several mid-sized banks suffered significant outflows this month after SVB’s roughly $170 billion in deposits were at risk because they were not insured by the U.S. government.

Banking regulators eventually agreed to protect SVB’s depositors, and U.S. Treasury Secretary Janet Yellen later said it offered guarantees to bankrupt SVB depositors. Can be duplicated at other institutions.

PacWest has another headache. Much of that lending has been focused on commercial real estate, and analysts argue that reduced demand for office and retail space due to the pandemic could make it harder for developers to repay the loans. .

The volume of delinquent loans at lenders surged nearly 60% in the fourth quarter to $209 million, but bad debt remains a relatively small portion of the $30 billion loan book.

PacWest shares fell 17% on Wednesday, more than 60% down so far this month. The broader KBW Bank Index fell 5% on the day.

The deal with asset-backed lending facility Atlas is part of a series of steps the bank said it took to boost access to financing as several US regional lenders grapple with the impact of the SVB collapse. A part.

PacWest has borrowed $3.7 billion from the Federal Home Loan Bank and $10.5 billion from the Federal Reserve Discount Window through the government’s lending program, and is considered two lenders of last resort for U.S. banks. I’m here.

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

PacWest said it had considered raising capital with potential investors, but the company “decided it was unwise to proceed with the transaction at this time.”

Taylor said Pakwest was encouraged by messages from government officials, including Yellen’s on Tuesday.

Despite the outflow of deposits, PacWest said it has opened about 130 new accounts in its venture capital business since March 9. Before the collapse, SVB dominated lending to venture capital firms.

Atlas SP is a new venture created by Apollo earlier this year after purchasing a majority stake in Credit Suisse’s securitized products business.

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PacWest Bancorp said it has lost 20% of its deposits this year but has stepped up access to cash by raising $1.4 billion through a line of credit from Apollo-backed investment firm Atlas SP Partners.PacWest deposits fell to $27.1 billion as of Monday from $33.9 billion at the end of 2022, the Beverly Hills-based bank said in a statement Wednesday. Nearly two-thirds of its deposits were covered by U.S. government-backed insurance programs, and banks had more cash on hand than uninsured deposits.”Looking ahead, we remain confident in PakWest’s strength and encouraged by the stability of deposits and liquidity over the past week,” CEO Paul Taylor said in a statement. Stated.The new funding arrangements will increase the banks’ ability to repay depositors who seek to withdraw their funds, but they will not improve the overall financial position that has been dragged down by losses in their bond portfolios. pak west It is one of the few West Coast regional banks to come under siege after the failure of Silicon Valley Bank earlier this month. Depositors at several mid-sized banks suffered significant outflows this month after SVB’s roughly $170 billion in deposits were at risk because they were not insured by the U.S. government.Banking regulators eventually agreed to protect SVB’s depositors, and U.S. Treasury Secretary Janet Yellen later said it offered guarantees to bankrupt SVB depositors. Can be duplicated at other institutions.PacWest has another headache. Much of that lending has been focused on commercial real estate, and analysts argue that reduced demand for office and retail space due to the pandemic could make it harder for developers to repay the loans. . The volume of delinquent loans at lenders surged nearly 60% in the fourth quarter to $209 million, but bad debt remains a relatively small portion of the $30 billion loan book.PacWest shares fell 17% on Wednesday, more than 60% down so far this month. The broader KBW Bank Index fell 5% on the day. The deal with asset-backed lending facility Atlas is part of a series of steps the bank said it took to boost access to financing as several US regional lenders grapple with the impact of the SVB collapse. A part.PacWest has borrowed $3.7 billion from the Federal Home Loan Bank and $10.5 billion from the Federal Reserve Discount Window through the government’s lending program, and is considered two lenders of last resort for U.S. banks. I’m here.PacWest also said it is now offering higher interest rates to depositors, raising interest rates on deposits to just over 2% from 1.71% at the end of last year.PacWest said it had considered raising capital with potential investors, but the company “decided it was unwise to proceed with the transaction at this time.”

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Taylor said Pakwest was encouraged by messages from government officials, including Yellen’s on Tuesday.Despite the outflow of deposits, PacWest said it has opened about 130 new accounts in its venture capital business since March 9. Before the collapse, SVB dominated lending to venture capital firms.Atlas SP is a new venture created by Apollo earlier this year after purchasing a majority stake in Credit Suisse’s securitized products business.
https://www.ft.com/content/5da23163-82ad-4775-aca2-28268b1c7006 PacWest secures $1.4 billion in cash from Atlas after deposits drop 20%

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