Turmoil in the US banking sector deepened yesterday after PacWest became the latest regional lender to seek a financial lifeline.
Shares in several American regional banks plunged as contagion fears intensified, just days after the Californian lender First Republic was bought by JP Morgan in a rescue deal.
It came as Bank of England data showed households pulled a record amount of deposits from lenders in March, suggesting the US crisis was beginning to impact UK banks.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, told the Telegraph that the data was a much clearer sign of contagion from the US bank failures than expected.
Shares in PacWest tumbled as much as 60% after it confirmed it was exploring a potential sale and was approached by several potential bidders regarding a deal.
The crisis of confidence in the sector and anxiety over its stability hit shares in other regional lenders, with Western Alliance falling more than 62% and First Horizon down by 40%.
Strong denial
Western Alliance pared back losses to around 30% following a strong denial that it was considering a potential sale of all or part of its business, as had been reported by the Financial Times.
Both PacWest and Western Alliance have faced scrutiny owing to their similarities with failed lenders Silicon Valley Bank and First Republic, such as having a high proportion of uninsured deposits.
Arizona’s First Horizon plunged after TD Bank, a Canadian lender, abandoned its planned £10.7billion takeover.
TD blamed uncertainty over whether the tie-up would be approved by regulators after US politicians raised concerns about TD becoming too big a player in the US market.
The rapid change in the interest-rate environment has put strain on US regional banks, causing deposit outflows.
Cash pulled by UK households
Meanwhile, Bank of England data published on Thursday showed a total £4.8billion was pulled by households from their bank accounts in March - the largest monthly withdrawal since 1997, when the records first began.
This was £1.65billion – or 53% – more than during October 2008, when bank customers pulled deposits during the financial crisis.
The March UK household deposit withdrawals represented only about 0.3pc of all household deposits, but economists said they showed a clear response to the banking sector turmoil.
Ashley Webb, of Capital Economics, said: “This is the first bit of data that we have had that covers the period immediately after the concerns over the health of the global banking system following Silicon Valley Bank and the takeover of Credit Suisse.
"It does feel like those jitters prompted a withdrawal of funds from the banking system. People didn't want to see a repeat of what happened with Northern Rock.”
FTSE 100
The UK's top share index, the FTSE 100, was up 50 points at 7,752 shortly after opening this morning, following yesterday's 85-point loss on the latest US bank concerns.
Brent crude futures were 1.28% higher at $73.45 a barrel.
Companies reporting today
- Trading update: InterContinental Hotels Group, International Consolidated Airlines Group