(Reuters) – Banc of California (NYSE:)’s 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.