Western Alliance Bancorp, despite facing turmoil earlier this year due to regional bank collapses, has become a favorite among Wall Street analysts and has the highest consensus rating in the KBW Bank Index. With the company set to report its earnings, it has an opportunity to win over skittish investors and prove naysayers wrong. The stock has rallied over 119% from its low point earlier this year, but still remains down by more than 33% since the start of 2023. Analysts expect the company to report a drop in profits for the third quarter, but they remain bullish on its valuation and the steps management has taken to stabilize the business. Deposit costs and net interest margin guidance will be key areas of focus.
Bank of America and Wells Fargo shares are rising alongside other bank names after Western Alliance Bancorp reported quarter-to-date deposit growth exceeding $2 billion as of May 12, easing broader banking concerns. Berkshire Hathaway's moves in the banking space last quarter, including adding to positions in Bank of America and Citigroup and investing more than $950 million in Capital One Financial Corp, could also be helping boost bank stocks this week.
Shares of US regional banks, including Western Alliance Bancorp, rallied after the bank reported that deposits had grown by more than $2 billion since the end of the quarter, easing concerns about the health of US regional lenders. The KBW Regional Banking Index rose 2.4% as a result. The sector has been under pressure since March, when a series of firms collapsed. Western Alliance has demonstrated "stability amid an uncertain operating backdrop," according to Bloomberg Intelligence analysts.
Shares of US regional lenders, including PacWest Bancorp, First Horizon Corp., and Western Alliance Bancorp, continue to slide amid concerns for a sector that has been rattled by the collapse of multiple firms. PacWest plunged 51% to its lowest close ever after exploring strategic options and Western Alliance tumbled 38% after denying reports of a potential sale. However, the turmoil in US regional banking is not expected to spill over into the global banking sector as a whole.
Shares of PacWest Bancorp and Western Alliance Bancorp plunged as reports of both banks exploring strategic options sparked investor worries of a widening financial crisis. Western Alliance denied the report, calling it "categorically false in all respects," and said it was weighing legal options against the newspaper. The KBW Regional Banking index dropped 3.3%.
Shares of PacWest Bancorp and Western Alliance Bancorp fell more than 25% each, leading a broader sell-off in regional bank stocks after JPMorgan's Jamie Dimon said "this part of the crisis is over" following the takeover of First Republic Bank. Other banks caught in the sell-off include Zions Bancorp and Fifth Third Bancorp. Dimon and Citigroup CEO Jane Fraser both expressed relief that the last remaining uncertainty of the small handful of banks that did not do a good job with asset liability management had been resolved.
Netflix shares gained less than 1% after posting a beat on per-share earnings but falling short of Wall Street's revenue estimates. Interactive Brokers' shares pulled back 4% after reporting adjusted earnings per share of $1.35, below a consensus estimate of $1.41. Western Alliance Bancorp's regional bank popped nearly 15% despite revenues coming in at $552 million, compared to the $666 million anticipated by analysts. Intuitive Surgical shares added 8% after posting an earnings beat with revenue coming in ahead of expectations at $1.70 billion. United Airlines gained 1.3% on forward guidance in the company's latest earnings report that forecasts a second-quarter profit.
Western Alliance Bancorp sought to calm investors by disclosing that insured deposits had risen to about 68% of its total deposits by the end of Q1, after an earlier financial update triggered a steep slide in the stock. However, the bank did not disclose its latest deposit balance or deposit outflow data, which it had shared in some of its previous updates.
Western Alliance Bancorp's shares recovered some of their losses after the bank reported that deposit outflows have stabilized and net outflows have returned to normalized levels. The bank also noted that deposit balances grew by $900 million since March 30 and that total insured deposits now stood at 68% of total deposits, significantly higher than year-end. The bank had suffered a total of $6 billion net deposit outflows in the first quarter, concentrated in its tech and innovation as well as settlement services groups.
Western Alliance Bancorp's stock fell 10.5% after providing a financial update ahead of its Q1 earnings report, which showed a decline in deposits. Morgan Stanley cut its outlook for midsize banks and suggested Wall Street do the same, citing fund costs, loan growth, fees, expenses, provisions, and capital. However, Baird analyst David George upgraded Zions Bancorp to outperform from neutral, saying the market appears to be pricing in "permanent profitability destruction," which Baird sees as unlikely, leaving "significant upside" in ZION stock.
Western Alliance Bancorp's shares fell by as much as 12% after the regional bank updated its financial disclosures without providing details on its deposit balance. Investors have been focused on the metric after a run on deposits contributed to the collapse of three lenders last month. The lack of information on deposit balance is likely to "frustrate investors," according to an analyst at Jefferies Financial Group.
Regional banks such as First Republic Bank, PacWest Bancorp, and Western Alliance Bancorp have recovered this week after being hit by a crisis of confidence following the collapse of Silicon Valley Bank and Credit Suisse earlier this month. UBS also saw a rise in trading. Deutsche Bank shares bounced back on Monday after a hard hit on Friday.
Despite recent negative headlines about banks, some investors, such as Citadel, see opportunities in smaller regional banks like Western Alliance Bancorp, whose stock has dropped 37% in the past week and in which Citadel has amassed a 5.3% stake.
Despite recent negative news about banks, some investors such as Citadel's Ken Griffin see opportunities and have invested in regional banks like Western Alliance Bancorp, whose stock was down 36.77% this past week.
Credit-rating agency Fitch Ratings has placed Western Alliance Bancorp's BBB-plus long-term-issuer default rating on review for a possible downgrade, making it the latest regional bank to face such an action in the wake of the failure of Silicon Valley Bank. The BBB-plus rating is three notches above junk. The stock has lost more than half its value in the month to date and hit a three-year low on Monday. Fitch is now considering the assignment of a negative or stable outlook, depending on market conditions and the impact on the bank’s deposit franchise, long-term earning power, and capitalization.
