A Pacific Western Bank branch in Encino, California, on Saturday, April 22, 2023.Morgan Lieberman | Bloomberg | Getty ImagesPacWest Bancorp led a relief rally in regional banks again on Monday, after the struggling lender slashed dividend to build capital amid the banking crisis.Shares of PacWest soared 39% in premarket trading Monday, adding to a near 82% pop on Friday. The company on late Friday evening announced a dividend cut to just 1 cent per share from 25 cents per share in the previous quarter. PacWest CEO Paul Taylor reassured investors that the bank’s businesses remains “fundamentally sound.”Other regional banks also rebounded for a second day. The SPDR S&P Regional Banking ETF (KRE) rose by 2.3% in premarket, following a 6.3% rally Friday. Western Alliance jumped 10% in premarket trading Monday after gaining 49% in the previous session, and Zions Bancorp rose 6% on Monday.Stock Chart IconStock chart icon PacWest”Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital,” Taylor said in a release.Worries about regional banks lingered after regulators took possession of First Republic last week, resulting in the third failure of an American bank since March. A rapid increase in interest rates has weighed on banks with long-term bond assets, causing a deposit flight. Institutions with a high proportion of uninsured deposits found themselves particularly vulnerable because customers feared losing savings in a bank run.Stock Chart IconStock chart icon Regional banking ETF 1 dayPacWest said last Wednesday it was exploring “all options,” confirming it was in talks with several possible partners and investors. The California-based bank said it had not experienced “out-of-the-ordinary deposit flows” after First Republic’s collapse.Shares of PacWest are down more than 40% in May and 75% for the year through Friday. The SPDR Regional Banking ETF is off by 10% in May and 35% for the year through Friday.Correction: PacWest Bancorp led a relief rally in regional banks again on Monday. An earlier version misspelled the name of the bank. …
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