PrivateBancorp Inc., which hired dozens of former LaSalle Bank lenders in hopes of becoming the Chicago area’s top middle-market business financier, has been hit with a shareholder lawsuit saying it routinely sacrificed loan quality for quantity as it aggressively ramped up growth.
The suit, which seeks class-action status, was brought by the City of New Orleans Employees’ Retirement System. It’s represented by New York law firm Bernstein Litowitz Berger & Grossmann LLP.
It contends that financial results of the Chicago-based bank were misleading because PrivateBancorp’s “thirst for growth caused the company to take on hundreds of millions of dollars in high-risk, low-quality loans, which the company failed to disclosed, even when substantial losses on those loans began to materialize.”
The lawsuit also said that, as a result of the bank’s false statements, the lender was able to raise hundreds of millions of dollars from investors.
A spokeswoman for PrivateBancorp, which began ramping up loan growth late in 2007, declined to comment.
In January 2009, “the truth about PrivateBancorp began to be revealed,” the lawsuit said, when the company announced a $62 million loss for the quarter due to worsening credit-quality trends. Its stock fell to $15.32 a share from $19.70 in reaction.
Its stock closed Monday at $11.68 a share, near the low end of a 52-week trading range of $8.33 to $19.31.
The lawsuit, which alleges securities laws violations, was filed Friday in U.S. District Court for the Northern District of Illinois on behalf of buyers of PrivateBancorp stock between Nov. 2, 2007, and Oct. 23, 2009.
Read the lawsuit.
I’m probably the poorest PrivateBank customer out there, and I’d find it surprising that if PrivateBank actually did this, that they did it systematically. This is a bank that actually makes lending decisions at a local level, and I don’t think much of it is automated. I’m lucky to have found a banking partner in PrivateBank because they gave me two loans when no one else would (granted they wouldn’t touch me with a ten foot pole now, but they haven’t lost any money on me either – I’m just higher risk, but still paying).
I have absolutely no scientific input on this article, but as much as I despise banks, PrivateBank for small business has been a better partner than any other bank would be (and don’t get me wrong – “better” does not necessarily always equate to “good” – they are still a bank.)
Private bank has taken over many banks with the FEd oversight and rich guarantee/buybacks, they will do fine and enrich themselves at our taxpayer expense or lower 401k yields
PrivateBank has taken over one bank – not many. And, that’s not going well.
Private Bank does not make loans based on local decisions. That’s a smoke & mirrors tactic. This greedy group is all about profit at the expense of morals and continues to erode the local banking industry.