PacWest plans to sell $2.6 billion real estate loans at discount

Interactive Brokers Chief Strategist Steve Sosnick joins Yahoo Finance Live to discuss PacWest's plan to sell $2.6 billion real estate loans at a discount and the outlook of the regional banking sector.

Video Transcript

BRAD SMITH: Meanwhile, we've been watching shares of PacWest here this morning. Enjoying a pop after the bank entered into an agreement to sell a portfolio of 74 real estate construction loans to a unit of real estate investment company Kennedy Wilson holding. Shares there are up by about 7% this morning here. And even as we're continuing to watch the difference in strategy and how they need to move forward just to succeed or to stay operating in a company, in PacWest, and some of the other regionals versus the large banks and the typical portfolio that they would have to their benefits as well here.

STEVE SOSNICK: Well, I mean, I think the bigger question, you know, without getting into specific name-- this name versus that name, we have thousands of banks in the US. Compare that let's say to many large companies in Europe, Canada, for example, where you have like-- Canada's got like 6 and a few others. So I'd argue that, you know, if-- as a former trader, that's a pretty wide market, 6, 3,000. You can drive a truck through that. So I would argue the right number is probably greater than what they have in Canada because my friends up there complain about their banks all the time. Although they're safe, they don't pay interest and et cetera, et cetera, not a lot of competition.

I do think we need a healthy regional banking sector. Friends of mine who are, you know, small midsized businessmen around the country, they use their regional banks, and they need them. You know, one of my friends who has a factory business was telling me he-- you know, he does-- he's in Cleveland, and he uses Key, and he uses Huntington, and he uses Fifth Third, he could use Wells Fargo, but he doesn't really like to because they're not as responsive. And so we do need-- you know, I picked on three banks. They're fairly large regional banks. And we do need a healthy sector there.

And if we-- maybe there's too much fragmentation, but I'll argue why we don't want all this concentration either because that's not helpful to-- you know, to thousands of businesses out there that rely on these institutions.