May 23 (Reuters) - PacWest Bancorp's (PACW.O) shares rose nearly 13%, extending gains from the previous session driven mostly by news that the lender would sell $2.6 billion worth of its loan portfolio to bolster its finances.
The stock was trading up at $7.06 on Tuesday, helping to lift the shares of other regional lenders with the KBW Regional Banking Index (.KRX) and the S&P Regional Banks Index (.SPCOMBNKS) each gaining more than 2%.
Valley National Bancorp (VLY.O) rose 5.8%, Comerica Inc (CMA.N) added 4.8%, Zions Bancorp (ZION.O) gained 5.8%, and Fifth Third Bancorp (FITB.O) was 2.6%.
PacWest's shares had surged nearly 20% on Monday, rebounding from record lows reached earlier this month, after the Los Angeles-based bank said it will sell 74 real estate construction loans with an outstanding balance of $2.6 billion to property firm Kennedy-Wilson Holdings Inc (KW.N), at a discount of nearly $200 million.
"Given the extreme moves in the stock over the past quarter, being in the stock requires an ability to handle higher volatility and to react to the news flow," RBC Capital Markets analysts wrote in a note.
Brokerage firm D.A. Davidson & Co raised its price target on PacWest to $8 from $3, saying the deal would help the bank build its common equity tier 1 (CET1) capital - a core measure of a lender's capital.
Earlier this month, the bank had said it was exploring strategic asset sales to sharpen focus on its core business segments as the regional banking sector grapples with its biggest crisis since 2008.
"While the strategy (to divest non-core assets) was put in place in early 2023, recent events have increased the import of asset sales as it relates to removing funding pressure from the balance sheet and building CET1 capital," the brokerage wrote in a note to clients.
Reporting by Niket Nishant in Bengaluru; Editing by Shinjini Ganguli
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