PacWest Bancorp (PACW), Western Alliance Bancorp (WAL), and First Horizon Corp. (FHN) all saw their shares increase in premarket trades on Friday, following significant losses seen in the previous trading session.
PacWest shares were up around 12.6% in pre-market trades on Friday, as it began to recover from some of its previous losses. The steep losses had been sustained during regular trading on Thursday. Shares of Western Alliance increased by around 13.3% in pre-market trades on Friday, while First Horizon was up around 7.2%. On Thursday, Western Alliance shares had closed down 38.5%, while First Horizon saw an overall decrease of 33%.
The global economy has been severely impacted by the coronavirus pandemic. Stock markets across the world have been volatile as a result. Banks, among other industries, have been negatively impacted by the pandemic, with many seeing significant declines in their stocks recently.
One of the primary ways in which the banking sector has been adversely affected is due to the mounting risk of credit losses on loans. This risk has arisen as businesses struggle to repay their debts and financial institutions have to move to cover their bad loans. The uncertainty surrounding the overall financial health of businesses and consumers has seen financial stocks decline amid the ongoing crisis.
As part of their response to the pandemic, the world’s central banks have taken several monetary measures, including aggressive interest rate cuts. Lower interest rates can have significant implications for banks in terms of lending and regional banks that focus on serving smaller business sectors may face even more significant pressure as a result.
Founded in 1999, PacWest Bancorp is a Los Angeles-based bank holding company. It is the parent company of Pacific Western Bank, which offers a wide range of financial services through more than 87 locations throughout California. Services provided by Pacific Western Bank include commercial banking, national lending, and venture-backed lending.
Established in 2003, Western Alliance Bancorp is the parent company of both Alliance Bank of Arizona and Western Alliance Bank. Western Alliance offers various commercial banking financial products and services in states including California, Nevada, and Arizona. It serves businesses, educational organizations, professional firms, and real estate developers.
First Horizon Corporation, originally known as First Tennessee Bank, offers a range of financial services through its subsidiary, SmartBank, which operates throughout the Southeast United States. Its offerings include business banking, real estate banking, and treasury management services. Its operations are also supported by affiliate organization First Horizon Advisors, which offers investment products and solutions.
It is worth noting that pre-market performances do not always accurately predict the final performance throughout the day. Markets around the world have seen a slump, and the situation remains uncertain. Banks generally are considered an essential sector during normal times, so the share prices of these banks declining by such significant amounts seems to reflect the precarious state of the markets.
As industries and businesses worldwide deal with the impacts of the virus, banks are struggling to keep up. However, the increase seen in pre-market trading in shares of PacWest Bancorp, Western Alliance Bancorp, and First Horizon Corp. is indeed a positive sign.
However, long-term prospects for businesses in the banking sector are uncertain. The full economic implications of the COVID-19 pandemic have not yet been realized, and it is difficult to predict the future performance of industries and businesses impacted by the crisis. As the situation continuesto evolve, the market will continue to show fluctuations and changes, some of which might be challenging for the banks.
As central banks work to implement new measures to deal with the current crisis, the impact on regional banks, including the likes of PacWest, Western Alliance, and First Horizon, will be important to monitor. Future stock performances for these banks will be determined by a myriad of factors including new central bank policies, overall economic conditions, and the ability of businesses to adapt and recover amid such a challenging and unpredictable situation.
