PacWest (NASDAQ:PACW) was able to sell some of its real estate loans, sending PACW stock up nearly 10% in pre-market trading this morning.
A portfolio of construction loans worth $2.6 billion was sold at a discount to Kennedy-Winston Holdings (NYSE:KW), a multinational real estate company based in Beverly Hills, California. PacWest said it has plans to sell loans worth another $363 million to Kennedy-Wilson.
PacWest opened at about $6.30 per share, a market capitalization of $750 million. Before Silicon Valley Bank closed in March, it traded at over $26 per share.
Bank Crisis Ebbing?
PacWest stock has been under pressure ever since Silicon Valley Bank began the regional bank crisis in March. The bank has over $44 billion in assets. It had over $28 billion in deposits at the start of May. But its market cap remains well under $1 billion on fears of a run by depositors.
Bargain hunters should know that the situation at PacWest remains volatile, however. PacWest customers pulled 9.5% of their deposits after First Republic Bank closed.
Most of the banking industry’s troubles right now are confined to the West Coast, where real estate values have been falling. That collateral creates losses on top of those from holding long bonds against deposits. Banks thought to be in trouble, like PacWest and Western Alliance (NYSE:WAL), have been shoring up their balance sheets and reporting progress regularly.
Kennedy-Wilson, which invests mainly in commercial real estate and apartment complexes, has $23 billion in assets under management. It reported a net loss of $49.8 million, 30 cents per share, in the March quarter. Its stock rose 3% on news of the PacWest deal. Despite its net losses, the company continues to pay its regular dividend.
PACW Stock: What Happens Next
If PacWest can pull itself out of trouble, investors who buy PACW stock today could make big gains. If it can’t, they could hold big losses.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
