Modelling A.I. in Economics

PacWest Bank Sells Off $2.1 Billion Loan Portfolio to Fairfax and Kennedy-Wilson

Pacific Western Bank (NASDAQ: PACW), a regional lender, has agreed to sell a $2.1 billion loan portfolio to Fairfax Financial Partners (TSX: FFH) and a subsidiary of Kennedy-Wilson Holdings (NYSE: KW).

The portfolio consists of commercial real estate loans, including loans to office, retail, industrial, and multifamily properties. The loans are primarily located in the United States, with a small portion located in Canada.

The sale is expected to close in the third quarter of 2023. PacWest expects to use the proceeds from the sale to reduce its balance sheet and improve its capital ratios.

"This transaction is consistent with our strategy of reducing our non-performing assets and improving our capital ratios," said Kevin Watt, CEO of PacWest. "We are pleased to partner with Fairfax and Kennedy-Wilson, who have a strong track record of managing commercial real estate loans."

Fairfax is a Canadian insurance company with a long history of investing in commercial real estate. Kennedy-Wilson is a real estate investment trust that specializes in acquiring, managing, and developing commercial real estate properties.

The sale of the loan portfolio is the latest in a series of moves by PacWest to improve its financial performance. In recent months, the bank has also raised capital, reduced its expenses, and increased its loan portfolio.

These efforts appear to be paying off. In the first quarter of 2023, PacWest reported net income of $354 million, up 20% from the same period a year ago. The bank's net interest margin also improved, to 3.73% from 3.64% a year ago.

PacWest's stock price has also been on the rise. The stock is up about 25% year-to-date, outperforming the broader market.

The sale of the loan portfolio is a positive development for PacWest. It will help the bank to reduce its balance sheet and improve its capital ratios. These moves will make PacWest a stronger and more competitive bank.

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