Bank stock drops as sale rumors denied.

Western Alliance Denies Sale Rumors Amidst Stock Plunge

Western Alliance, a regional bank based in Phoenix, Arizona, saw its stock plummet and partially recover on Thursday amidst rumors of a potential sale. The firm denied the claims, calling them “absolutely false” and stating that it would pursue legal action over the story. Despite this, shares for Western Alliance fell nearly 34% on Thursday, with regulators repeatedly halting trading of the company’s stock.

Volatility in the Financial Sector Continues

The continued tumult and investor unease in the financial sector occurs immediately after Federal Reserve Chair Jerome Powell declared on Wednesday afternoon that the banking system remains “sound and resilient.” Policymakers also worked to increase the target federal funds rate over the past year to combat inflation by hiking interest rates across the economy, prompting heavy losses when Silicon Valley Bank sold a long-term bond portfolio to fund withdrawals. Assets in the overall banking system are now $2 trillion lower than their book value due to the elevated interest rates, according to a recent study from the National Bureau of Economic Research.

Other Banks Also Consider Sale Options

PacWest, which saw declines of 17% over the same time horizon, also witnessed market volatility on Thursday and announced that the company would evaluate the possibility of a sale and other “options to maximize shareholder value.” The volatility comes days after First Republic Bank imploded and weeks after Silicon Valley Bank and Signature Bank similarly failed as customers with balances above the Federal Deposit Insurance Corporation threshold at the three medium-sized banks rushed to withdraw their funds.

Lessons Learned from Silicon Valley Bank Failure

Officials at the Federal Reserve unveiled a report last week concluding that the failure of Silicon Valley Bank came as executives neglected to properly assess risk and address turmoil within the technology sector, upon which the firm was heavily reliant for customers.

Conclusion

Despite the recent volatility in the financial sector, policymakers remain committed to learning from these events and preventing them from happening again. As for Western Alliance, the firm continues to deny rumors of a potential sale and remains focused on its financial soundness and profitability.