Banc of California Rebounds After Denying Claims of Con Man Ties

  • Lender’s stock had plunged on report by anonymous short seller
  • Bank says independent investigation has cleared firm so far

Banc of California Inc. rebounded after denying claims by an anonymous short seller that the lender’s leadership had ties to an imprisoned con man.

The bank’s shares climbed 19 percent to $13.45 at 11:29 a.m. in New York, erasing much of Tuesday’s decline, when they plunged the most in more than a decade. The firm also reported third-quarter earnings that beat analysts’ estimates a day earlier than planned, and raised its profit forecast.

“We remain focused on ensuring that as we grow, we maintain the controls, culture and values,” Chief Executive Officer Steven Sugarman said in a statement Wednesday. “Our third-quarter financial performance showcases the strong credit discipline and growing earnings power of our franchise.”

The anonymous short-seller, who uses the name Aurelius, wrote a post Tuesday on Seeking Alpha calling the bank “un-investible" because of the alleged ties to Jason Galanis, a California financier. John Grosvenor, the bank’s general counsel, said Wednesday that an independent investigation has shown so far Galanis has no control over the bank or lending relationship with it.

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Banc of California has asked Seeking Alpha to remove the post, and won’t say more about Galanis until the dispute is resolved, Grosvenor said on a conference call to discuss earnings. Sugarman declined to answer questions on the call about which directors were leading the investigation or whether regulators were asking questions about it. Aurelius didn’t respond to a message on Twitter.

The short seller had made inaccurate claims about another bank, Bob Ramsey, an analyst at FBR Capital Markets, wrote in a note to investors before the call. UBS Group AG analyst David Eads said he was placing his “buy" rating for the bank under review and asked for more thorough disclosure from management.

Third-quarter net income more than doubled to $35.9 million, or 59 cents a share, from $14.5 million, or 29 cents, a year earlier, the Irvine, California-based bank said in the statement. The average estimate of eight analysts surveyed by Bloomberg was for adjusted per-share profit of 42 cents. The lender raised its 2016 earnings-per-share forecast to at least $1.85 from $1.60, according to a presentation on its website.

Since Sugarman helped recapitalize the bank in 2010, its assets have soared more than 10-fold to $10.2 billion as of midyear, making it the fastest-growing publicly traded U.S. lender. It’s riding high enough to pay $100 million for the naming rights for a new stadium in Los Angeles, one of the richest prices ever in Major League Soccer. Its market-beating returns have come despite concerns raised about deals benefiting Sugarman’s family and board members.

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