: Fitch downgrades PacWest debt to junk status after deposit flight exceeds peers

The move came after a review of the debt of 14 small and mid-sized banks.

“The downgrades were largely limited to a subset of banks that experienced either deposit outflows notably in excess of peers or low tangible capital levels,” Fitch said in a statement.

The review was launched after the steep decline in deposits at regional banks in the wake of the collapse of Silicon Valley Bank in March, which triggered a massive deposit flight from other lenders.

Since then, Signature Bank was sold to New York Community Bancorp.
NYCB,
-1.87%
and JPMorgan
JPM,
+0.39%
acquired First Republic. A fourth bank, Silvergate Bank, liquidated in March with no buyer.

Overall, banks are expected to face greater headwinds from the tightening liquidity environment, although results will differ depending on each bank’s geography and business model, Fitch said.

Tighter liquidity in turn is expected to moderate the “robust” 13% median loan growth the U.S. mid-tier banking group experienced in 2022, it added

Fitch also revised downward its outlook on four regional banks, lowering three to negative from stable and one to stable from positive.

The news came a day after Western Alliance triggered powerful gains in beaten-up regional-bank stocks after it said its deposits have grown by $2 billion during the second quarter.

That news eased concerns that continue to weigh on the sector, amid fears the crisis is not yet over.

See now: Regional bank crisis is ‘not over,’ warns former Fed Vice Chairman Quarles

PacWest stock was up 6% Thursday, but is down 79% in the last three months.

Western Alliance Bancorp was up 0.4% and has lost 53% in the last three months. Trustmark was down 1.5% and has lost 37% in the last three months.

The SPDR S&P Regional Banking ETF
KRE,
+0.40%
was down 0.3% and has lost 33% in the period, while the S&P 500
SPX,
+0.62%
has gained 2%.