London Daily

Focus on the big picture.
Sunday, Aug 24, 2025

More US banks under pressure as Fed faces rate hike backlash

More US banks under pressure as Fed faces rate hike backlash

PacWest has seen its share price hammered by 90% since the start of the US banking turmoil while other major regional lenders are also in the firing line.
Another US regional lender has revealed talks to shore up its finances and a further has had its share price was clobbered amid the crisis of confidence to hit the country's banking sector.

Three lenders - Silicon Valley Bank, Signature Bank and First Republic - have failed this year on the back of balance sheet pressure caused by rising interest rates that have hit the value of their bondholdings.

Regional lenders have seen their share prices come under further pressure this week as investors seek out signs of any weakness.

First Republic was bought by Wall Street's largest bank JPMorgan on Monday after it failed to recover from a $100bn deposit flight in March.

LA-based lender PacWest Bancorp saw its shares decline by more than 50% on Wednesday - taking its market value loss to 90% during the crisis to date.

They were down a further 30% in Thursday's pre-market trading after it revealed talks with potential partners and investors about its "strategic options" despite a sizeable cash injection that was agreed at the start of the industry crisis.

Shares were down more than 40% when markets opened on Thursday morning in the US.

The bank said that while it had not experienced any unusual deposit outflows since the sale of First Republic, it was normal for the company and its board of directors to "continuously review" those options.

"Recently, the company has been approached by several potential partners and investors - discussions are ongoing," its statement said.

"The company will continue to evaluate all options to maximise shareholder value."

The options could include a sale or capital raising, the Reuters news agency reported citing a source.

Other regional lenders have seen their share prices hammered in recent days.

Arizona-based Western Alliance lost 23% of its market value on Wednesday despite insisting it had not experienced any unusual deposit outflows and had adequate liquidity.

Its losses deepened on Thursday as much as 62% with trading halted at multiple points through the morning.

There are fears the crisis of confidence will hurt the availability of credit in the US economy, already tipped by economists to enter recession this year.

Ten consecutive rate hikes imposed by the US Federal Reserve to keep a lid on inflation have been blamed for the banking sector's woes.

The Fed raised its main rate by a further quarter point on Wednesday night despite the banking turmoil and economic slowdown.

It did, however, give a hint that the rise would be the last for a while as it digested the impact of its tightening cycle.

There is still a "growing concern that the rapid pace" of higher interest rates has undermined the foundations of some mid-sized US banks, the head of financial analysis at AJ Bell said.

"Hardly household names with global investors until the last few months, now every ear is straining to catch the sector's next distress call."

"Banking stocks have taken another beating today as markets worry that PacWest might be the next domino to fall.

"Even if [the PacWest] alarm proves to be a false one, the implications for the global economy could be huge," Danni Hewson said.

"Reluctance to lend from a nervous sector which is battening down the hatches could mean that dreams of a softish landing become recession-filled nightmares."

One critic of the Fed response, the boss of financial advisory and asset management firm deVere Group, said the US central bank had failed at every hurdle since the inflation problem first surfaced.

Nigel Green said it had risked a longer-term recession through the latest rate hike.

"Clearly, this would not only be a huge issue for the US, but the global economy too," he warned.

"First, the crisis within the US financial system is still not over. There remain serious and legitimate concerns that after a string of bank failures, there could be more to come.

"The turmoil from the banking crisis is leading to a drop in bank lending, tightening the credit conditions for households and businesses. In turn, this will inevitably lead to a slowdown in economic activity and hiring.

"Chair Powell himself has said at a news conference that the bank turmoil had the equivalent impact of at least one quarter-point rate increase."
Newsletter

Related Articles

0:00
0:00
Close
Deputy Prime Minister Angela Rayner Purchases Third Property Amid Housing Tax Reforms Debate
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Italian Facebook Group Sharing Intimate Images Without Consent Shut Down Amid Police Investigation
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
Sam Nicoresti becomes first transgender comedian to win Edinburgh Comedy Award
Builders uncover historic human remains in Lancashire house renovation
Australia Wants to Tax Your Empty Bedrooms
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
FBI Investigates John Bolton Over Classified Documents in High-Profile Raids
Report reveals OpenAI pitched national ChatGPT Plus subscription to UK ministers
Labour set to freeze income tax thresholds in long-term 'stealth' tax raid
Coca‑Cola explores sale of Costa coffee chain
Trial hears dog walker was chased and fatally stabbed by trio
Restaurateur resigns from government hospitality council over tax criticism
Spanish City funfair shut after serious ride injury
Suspected arson at Ilford restaurant leaves three in critical condition
Tottenham beat Manchester City to go top of Premier League
Bank holiday heatwave to hit 30°C before remnants of Hurricane Erin arrive
UK to deploy immigration advisers to West Africa to block fake visas
Nurse who raped woman continued working for a year despite police alert
Drought forces closures of England’s canal routes, canceling boat holidays
Sweet tooth scents: food-inspired perfumes surge as weight-loss drugs suppress appetites
Experts warn Britain dangerously reliant on imported food
Family of Notting Hill Carnival murder victim call event unmanageable
Bunkers, Billions and Apocalypse: The Secret Compounds of Zuckerberg and the Tech Giants
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
×