Banc of California shares drop on concerns over bigger provisions (updated)
25/07/2024 04:04
(Adds context on assets before and after merger in paragraph 3)
July 23 (Reuters) - Banc of California's BANC.N shares
fell 8% on Tuesday after the lender disclosed it had increased
its provisions for potential loan defaults in the second
quarter, partly due to reserves tied to office loans.
The move could add to investor concerns about the banking
industry. High interest rates and low occupancy in office
buildings due to companies embracing remote work have squeezed
borrowers and increased fears of defaults at banks.
Banc of California boosted its provisions for credit losses
to $11 million, five times higher than last year. The increase
in provisions comes after the company merged with PacWest
Bancorp creating a combined bank with assets of $35.2 billion at
the end of the second quarter, compared with $9.4 billion a year
earlier, before the deal was completed.
"The hike in their provisions may unnerve some investors,
especially if they feel that the bank may be playing catch up
with reserves and not getting ahead of the game," said Michael
Ashley Schulman, chief investment officer at Running Point
Capital.
Profit available to Banc of California's common shareholders
was $20.4 million, or 12 cents per share, in the second quarter,
compared with a loss of $207.4 million, or $2.67 per share, a
year earlier.
(Reporting by Niket Nishant and Manya Saini in Bengaluru;
Editing by Lananh Nguyen and Christopher Cushing)
((Niket.Nishant@thomsonreuters.com))