After dropping as much as 80% in March, PacWest Bancorp (NASDAQ: PACW) started slowly recovering. The California-based bank holding company recently reported its Q1 earnings which surpassed expectations providing a bullish outlook for the stock. With its deposits slowly increasing over the past few weeks after witnessing a deposit outflow last month, in addition to de-levering its balance sheet, PACW could be on its path to recovery. The stock also caught the attention of investor Bill Gross who thinks PACW alongside other bank stocks are currently trading at a discount and are set to recover. With this in mind, PACW could be a great long-term investment.
PACW Fundamentals
Following the SPDR S&P Regional Banking ETF drop in March, the market for bank stocks has been bearish where many bank stocks have taken massive hits including First Republic Bank (NYSE: FRC) and PACW. Since then, the question on investors’ minds was which bank stocks will be able to recover from this crisis moving forward. Notably, PACW could be a prime candidate to recover in light of its recent promising earnings report.
After suffering from significant deposits outflow during March, PACW deposits started to recuperate with the bank’s deposits increasing from $27.1 billion on March 20th to $28.2 billion on March 31st – a $1.1 billion growth. Additionally, PACW deposits further increased by
700
million as of April 24th. Moreover, the bank aims to bolster its deposits even further as it established initiatives to launch new depository channels, including a direct-to-consumer bank expected to be operational by the third quarter of 2023. For these reasons, the bank could see a healthy stream of deposits moving forward.
Along with that, PACW’s number of insured deposits grew according to the bank’s CEO who stated “Our deposits have stabilized with total insured deposits increasing from 48% of total deposits at year-end to 71% of total deposits on March 31, 2023.” As of April 24th, this percentage increased even more to 73%. As a result, the bank’s coverage ratio grew to 153% with the bank’s on-balance sheet liquidity and unused borrowing capacity reaching $12.4 billion exceeding its uninsured deposits of $8.1 billion as of March 31st. In that regard, the bank currently sits in a comfortable position as it will be able to handle any future withdrawals.
Attempting to revamp its balance sheet, PACW moved its $2.8 billion lender finance business to held for sale and initiated the sale of approximately 650 million in civic loans. Consequently, PACW’s liquidity position will be enhanced taking it one step closer to surpassing a 10% CET1 ratio after having already increased it from 8.70% to 9.22% as of March 31st. Based on this, the bank’s risks could lessen in the future.
Moreover, PACW is utilizing borrowing from the FHLB the bank term funding program, and temporarily from the Federal Reserve discount window while also securing $1.4 billion in fully funded cash proceeds from Atlas SP Partners. The fund occurred through a new senior asset-backed financing facility, which unlocked liquidity from unencumbered high-quality assets in an expeditious manner. As a result, the bank’s interest expense increased by 88 million to 239 million causing its net interest margin to decline by 2.89%, however, the bank expects this number to start improving in Q3 as stated by its CFO.
Finally, PACW reported a net loss of $1.21 billion, however, this is mainly due to the bank’s goodwill impairment expenses that totaled $1.38 billion which is a noncash charge and has no impact on our regulatory capital ratios, cash flows, or liquidity position. On the other hand, PACW’s adjusted earnings were $89.4 million which translates to $0.66 EPS beating the estimated $0.61 EPS by analysts indicating the strength of the bank’s business. PACW’s stock ran 15% following the earnings report which could further indicate that the bank is on the right track to recover.
In other news, Bill Gross – an American investor and fund manager, best known for co-founding Pacific Investment Management Co. – announced that he has invested in several bank stocks including PACW as well as the SPDR S&P Regional Banking ETF. Gross has described these purchases as “an enticing long-term investment” as most bank stocks are currently trading at a discount following the collapse that occurred in March.
PACW Financials
In its 2023 Q1 report, PACW has reported $44.3 billion in assets including $6.6 billion in cash and cash equivalents and $25.4 billion in loans. PACW witnessed an increase in assets from $41.4 billion including an increase in its cash and cash equivalents from $2.2 billion and a decrease in its assets from $28.4 billion. PACW liabilities grew QoQ from $37.2 billion to $41.5 billion as its borrowings increased from $1.7 billion to $11.8 billion while its deposits decreased from $33.9 billion to $28.1 billion
PACW’s total interest income grew QoQ from $473 million to $517.7 million, however, its net interest income declined from $322.9 million to $279.2 million due to an increase in its total interest expense from 150 million to $238.5 million. Moreover, the bank’s total non-interest income increased from a loss of $18.9 million to an income of $36.6 million. Finally, the company reported net loss earnings available to common stockholders of $1.2 billion after reporting a net profit of $39.5 million the previous quarter due to goodwill impairment costs of $1.3 billion.
Technical Analysis
PACW stock’s trend is neutral as it is trading in a sideways channel between the support at $10.2 and the resistance at $12.13
Looking at the indicators, PACW stock is currently trading below the 21 MA, 50 MA, and 200 MA which is a bearish sign. The RSI is approaching oversold at 34 and the MACD is bearish.
Fundamentally, PACW’s most recent catalyst was its earnings report however it doesn’t currently have any upcoming catalysts.
A possible play would be an entry here as the stock is currently testing the $10.2 support line expecting its price to increase as the RSI recalibrates taking profits on testing the resistance line while leaving a tail anticipating the stock to break through its support line as a part of its long term recovery anticipation.
PACW Forecast
Following its recent positive earnings report, PACW started recovering with the stock running nearly 15%. The bank reported a healthy increase in its deposits during the end of March and throughout April including an increase in its insured deposits while also discussing its efforts to further grow these numbers in the future. PACW also explained its efforts to de-lever its balance sheets by selling off its loans in an attempt to increase its CET1 ratio. Additionally, PACW increased its borrowings from the FHLB bank, the Federal Reserve, and Atlas SP partners which caused its net interest margin to decrease, however, this number is expected to increase during Q3 according to the bank’s CFO.
The stock also caught the attention of American investor Bill Gross who thinks PACW and other bank stocks are great long-term investments and are set to recover in the future. Based on these information, PACW could be one of the most bullish bank stocks right now and could have a promising stock forecast in the future.
PACW Fundamentals
Following the SPDR S&P Regional Banking ETF drop in March, the market for bank stocks has been bearish where many bank stocks have taken massive hits including First Republic Bank (NYSE: FRC) and PACW. Since then, the question on investors’ minds was which bank stocks will be able to recover from this crisis moving forward. Notably, PACW could be a prime candidate to recover in light of its recent promising earnings report.
After suffering from significant deposits outflow during March, PACW deposits started to recuperate with the bank’s deposits increasing from $27.1 billion on March 20th to $28.2 billion on March 31st – a $1.1 billion growth. Additionally, PACW deposits further increased by
700
million as of April 24th. Moreover, the bank aims to bolster its deposits even further as it established initiatives to launch new depository channels, including a direct-to-consumer bank expected to be operational by the third quarter of 2023. For these reasons, the bank could see a healthy stream of deposits moving forward. Along with that, PACW’s number of insured deposits grew according to the bank’s CEO who stated “Our deposits have stabilized with total insured deposits increasing from 48% of total deposits at year-end to 71% of total deposits on March 31, 2023.” As of April 24th, this percentage increased even more to 73%. As a result, the bank’s coverage ratio grew to 153% with the bank’s on-balance sheet liquidity and unused borrowing capacity reaching $12.4 billion exceeding its uninsured deposits of $8.1 billion as of March 31st. In that regard, the bank currently sits in a comfortable position as it will be able to handle any future withdrawals.
Attempting to revamp its balance sheet, PACW moved its $2.8 billion lender finance business to held for sale and initiated the sale of approximately 650 million in civic loans. Consequently, PACW’s liquidity position will be enhanced taking it one step closer to surpassing a 10% CET1 ratio after having already increased it from 8.70% to 9.22% as of March 31st. Based on this, the bank’s risks could lessen in the future.
Moreover, PACW is utilizing borrowing from the FHLB the bank term funding program, and temporarily from the Federal Reserve discount window while also securing $1.4 billion in fully funded cash proceeds from Atlas SP Partners. The fund occurred through a new senior asset-backed financing facility, which unlocked liquidity from unencumbered high-quality assets in an expeditious manner. As a result, the bank’s interest expense increased by 88 million to 239 million causing its net interest margin to decline by 2.89%, however, the bank expects this number to start improving in Q3 as stated by its CFO.
Finally, PACW reported a net loss of $1.21 billion, however, this is mainly due to the bank’s goodwill impairment expenses that totaled $1.38 billion which is a noncash charge and has no impact on our regulatory capital ratios, cash flows, or liquidity position. On the other hand, PACW’s adjusted earnings were $89.4 million which translates to $0.66 EPS beating the estimated $0.61 EPS by analysts indicating the strength of the bank’s business. PACW’s stock ran 15% following the earnings report which could further indicate that the bank is on the right track to recover.
In other news, Bill Gross – an American investor and fund manager, best known for co-founding Pacific Investment Management Co. – announced that he has invested in several bank stocks including PACW as well as the SPDR S&P Regional Banking ETF. Gross has described these purchases as “an enticing long-term investment” as most bank stocks are currently trading at a discount following the collapse that occurred in March.
PACW Financials
In its 2023 Q1 report, PACW has reported $44.3 billion in assets including $6.6 billion in cash and cash equivalents and $25.4 billion in loans. PACW witnessed an increase in assets from $41.4 billion including an increase in its cash and cash equivalents from $2.2 billion and a decrease in its assets from $28.4 billion. PACW liabilities grew QoQ from $37.2 billion to $41.5 billion as its borrowings increased from $1.7 billion to $11.8 billion while its deposits decreased from $33.9 billion to $28.1 billion
PACW’s total interest income grew QoQ from $473 million to $517.7 million, however, its net interest income declined from $322.9 million to $279.2 million due to an increase in its total interest expense from 150 million to $238.5 million. Moreover, the bank’s total non-interest income increased from a loss of $18.9 million to an income of $36.6 million. Finally, the company reported net loss earnings available to common stockholders of $1.2 billion after reporting a net profit of $39.5 million the previous quarter due to goodwill impairment costs of $1.3 billion.
Technical Analysis
PACW stock’s trend is neutral as it is trading in a sideways channel between the support at $10.2 and the resistance at $12.13
Looking at the indicators, PACW stock is currently trading below the 21 MA, 50 MA, and 200 MA which is a bearish sign. The RSI is approaching oversold at 34 and the MACD is bearish.
Fundamentally, PACW’s most recent catalyst was its earnings report however it doesn’t currently have any upcoming catalysts.
A possible play would be an entry here as the stock is currently testing the $10.2 support line expecting its price to increase as the RSI recalibrates taking profits on testing the resistance line while leaving a tail anticipating the stock to break through its support line as a part of its long term recovery anticipation.
PACW Forecast
Following its recent positive earnings report, PACW started recovering with the stock running nearly 15%. The bank reported a healthy increase in its deposits during the end of March and throughout April including an increase in its insured deposits while also discussing its efforts to further grow these numbers in the future. PACW also explained its efforts to de-lever its balance sheets by selling off its loans in an attempt to increase its CET1 ratio. Additionally, PACW increased its borrowings from the FHLB bank, the Federal Reserve, and Atlas SP partners which caused its net interest margin to decrease, however, this number is expected to increase during Q3 according to the bank’s CFO.
The stock also caught the attention of American investor Bill Gross who thinks PACW and other bank stocks are great long-term investments and are set to recover in the future. Based on these information, PACW could be one of the most bullish bank stocks right now and could have a promising stock forecast in the future.