Pacific Western Bancorporation shares fell over 50% as the American markets opened after it became the latest lender to eye up a rescue deal on Wednesday.
Western Alliance Bancorporation fell 39% on Thursday morning in response, while Metropolitan Bank Holding Corp was down 10.5%.
California-based PacWest instructed investment bank Piper Sandler to help with exploring strategic options and even a sale on Wednesday, Bloomberg reported, despite raising US$1.4bn in late March via a lending facility from Apollo-backed investor Atlas SP Partners.
Furthering the strain, a proposed US$13bn merger between TD Bank and Tennessee-based First Horizon was scrapped on Thursday morning, with the latter citing regulatory uncertainty as the main reason for the collapse of the deal.
News of PacWest's sale process, which is yet to be formally initiated, has prompted fears of a fourth US bank failure in just two months, following Silicon Valley Bank (SVB), Signature and First Republic most recently.
“Investors are worried that it [PacWest] will be the next domino to fall as worries swirl about deposit flight and the lack of asset diversification among smaller lenders,” Hargreaves Lansdown analyst Susannah Streeter noted.
“The point here is that the 15-base point decline in US two-year yields overnight seems to have been driven by the banking crisis - not the Fed commentary,” ING analysts added.
Similarly to SVB, PacWest has ties to the tech community and holds a significant number of uninsured deposits.
PacWest reported in April that US$5bn worth of deposits had been lost in the first quarter, though the US$29bn that were left meant it was smaller than peers SVB and First Republic.