PacWest Bancorp plans to implement a merger deal with Banc of California.
The lenders, which are representatives of the sector of regional banks, last Tuesday, July 25, published a joint statement confirming the intention to merge. This statement also contains the desire of financial institutions to raise capital in the amount of $400 million. The lenders announced their intentions on the eve of the publication of the results of activities for the second quarter of 2023.
The terms of the future bank merger deal stipulate that financial institutions will merge under the name Pacific Western Bank.
The creation of a single structure based on two lenders is an action aimed at restoring confidence in the regional banking sector after the collapse of three organizations representing this system.
Jared Wolff, president, and CEO of Banc of California, says that the combined company will have the strength and market position to meet the needs for banking services among small and medium-sized businesses in California. Also, according to him, the merger process will provide an opportunity to benefit from the space of possibilities for major players, which was formed after the turmoil in the sphere at the beginning of this year.
Jared Wolff will continue to serve as President and CEO of the united bank.
PacWest reported that a net profit loss of $197.4 million was recorded in the last quarter. The financial institution also stated a reduction in deposits by $290 million, to $27.9 billion over the same period.
Banc of California reported that in its case, net profit decreased by $2.4 million last quarter. The financial institution also stated a reduction in the total amount of deposits from $7 billion to $6.9 billion.
PacWest found itself in a zone of significant external pressure after the March collapse of the Silicon Valley Bank. This event was a shock and something very similar to a tragedy for American regional lenders.
In the last quarter, most regional financial institutions were able to regain the positions lost after the March shock. Many lenders began to pay higher interest rates on deposits at the expense of their profits. This decision was aimed at encouraging customers not to transfer funds to other banks. The relevant data are contained in the reports of regional lenders for the second quarter of 2023.
Before the bankruptcy, SVB was the 16th largest US bank. In March, there was a sudden collapse of a financial institution. This lender, like many other representatives of the banking sector, invested billions in US government bonds during the period of interest rates fixed near zero. Reliable conditions were annulled when the Federal Reserve began to implement a policy of aggressively raising interest rates as part of efforts to combat inflation.
The merger of Banc of California and PacWest will be completed by early 2024.
As a result of the first reports about the merger of banks, the value of PacWest shares decreased by 27% but increased by 30% during off-hours. After the deal is completed, the shareholders of this lender will receive 0.66% of the shares of the second financial institution for each share they own. The price of securities of Banc of California on the background of information about the merger increased by 11%.
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