Several regional banks in the United States saw their share prices drop in after-hours trading on Wednesday, despite Federal Reserve Chairman Jerome Powell's assurances that the sector was "sound" and "resilient."
The hardest-hit bank was PacWest Bancorp, whose share price fell 52.5% after Bloomberg reported that the bank would explore strategic options on May 4. Other regional banks that experienced significant drops in their share prices were Western Alliance Bancorp (22.4%), Metropolitan Bank (16.2%), and HomeStreet (7.8%). According to Bloomberg, PacWest Bancorp is exploring a sale or capital raising.
Powell had tried to calm concerns about the banking sector, stating that the Federal Reserve would hike interest rates another 25 base points. However, some Twitter users mocked Powell's comments, with one stating that the collapse of five banks, including PacWest Bancorp, "sounds like a very sound and resilient banking system." Another user noted that over $500 billion had been wiped out from "bank failures" in the past month alone.
PacWest Bancorp's share price drop is set to wipe out about $340 million from its market cap, which was $772 million at Wednesday's close. The drop in share prices came after several regional banks had integrated blockchain-based payment solutions for their clients, including Western Alliance Bancorp. Metropolitan Bank, which once offered services to crypto firms, closed its digital asset vertical in January because it was not satisfied with how the cryptocurrency industry was developing.
The banking sector's performance is being closely watched, particularly following the collapse of First Republic Bank, the second biggest bank failure in recent times. The news of a government receivership broke on April 26, causing the bank's share price to plummet 20% in hours. Powell stated that the Federal Reserve is "committed to learning the right lessons from this episode," and "we'll work to prevent events like these from happening again."