Pacwest Bancorp (NASDAQ:PACW) has been having a rough time of late, especially as bank stocks go. A regional bank that endured a lot of fallout from the Silicon Valley Bank affair, recently, Pacwest has started to stage a recovery. That recovery got a bit of a setback today thanks to some new analyst coverage, with Pacwest’s shares down slightly in Thursday afternoon trading.
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The trouble for PacWest started earlier today when Richard Bove, an analyst with Odeon Capital, started up coverage on PacWest by declaring the bank’s stock a Hold. That’s not so bad in and of itself, but Bove’s reasoning suggested some potentially serious problems in store. Bove noted that the bank’s situation is a lot more stable than it was, certainly. However, the bank’s decisive action may not have been as correct. PacWest took a lot of urgent steps to stem its losses, from selling operations to closing operations to ramping up its certificate of deposit rates. That meant some significant costs to the bank, and that could leave it in trouble later.
Indeed, one of those moves featured Fairfax Financial recently stepping in to buy a construction loan portfolio that PacWest sold. Fairfax Financial is set to drop $2 billion on 63 different loans, which is something of a problem for PacWest. PacWest originally sold 74 loans to Kennedy Wilson for $2.4 billion, which was already a discount against the $2.6 billion principal balance that the portfolio represented.
Meanwhile, most analysts agree with Bove here. Currently, analyst consensus calls PACW stock a Hold, with two Buy ratings against seven Hold ratings. Further, it offers investors 56.94% upside potential thanks to its average price target of $14.47.
