Investors cheered PacWest (NASDAQ:PACW) cutting its dividend, with the stock surging more than 30% in the premarket Monday.
The regional bank said late Friday it reduced its dividend to just one cent per share from 25 cents per share.
“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,” CEO Paul Taylor said in a statement.
Bank deposit data also helped to reassure investors. UBS equity analyst Erika Najarian said last week’s data from the Federal Reserve provided “no negative surprises,” and provides a baseline for next week’s data. “We think next week’s data will be especially important given the market narrative around continued deposit pressure at regionals, which created the roller coaster ride of last week,” she wrote in a note to clients.
The bank’s association with First Republic or Silicon Valley Bank looked to some experts based on geographical location alone. In addition, at the end of April, volatility seemed to be already subsiding following decisive actions to stabilize the banking sector. PACW did report 1Q23 results, which were better than expected by analysts, and caused a mini rally in the share price. According to management, there was not much standing in the way of a further recovery in the level of deposits.
PACW shares opened Monday up $1.38, or 24%, to $7.14.