WAL - Western Alliance stock plunges as investors analysts weigh mixed financial update

2023-04-05 12:23:36 ET

Western Alliance Bancorporation ( NYSE: WAL ) stock plummeted 16.6% in Wednesday afternoon trading as investors and analysts digested the regional lender's quarter-end financial update released Tuesday evening.

The company's insured deposits, including collateralized and pass-through insured deposits, climbed to 68% at March 31 from 55% at the end of 2022, and its immediately available liquidity exceeds uninsured deposits with a coverage ratio exceeding 140%.

Wedbush's David Chiaverini believes the improvement in insured deposits owed to "uninsured deposit run-off rather than insured deposit inflows," he said in a note. He is forecasting deposits could be off some 15% in Q1 depending "on the extent to which WAL pledged assets as collateral to uninsured depositors."

Also, it has no borrowings outstanding from the Federal Reserve's discount window, "but we don't know what peak usage was nor do we know balances outstanding of other borrowing facilities," Jefferies analyst Casey Haire wrote in a note.

Given last month's bond market rally, it comes at no surprise that unrealized losses on Western Alliance's ( WAL ) securities and held-for-investment loans have improved since year-end.

Estimated held to maturity paper loss was $139M vs. $177M at Dec. 31, 2022; available-for-sale securities loss stood at $789M vs. $881M; HFI loans loss of $2.9B vs. $4.2B; and gains on debt and other borrowings of $431M vs. $121M.

With its bond book accounting for only 13% of assets, along with "a relatively light HTM designation and 40% of bonds being floating rate, mgmt. is capable of selling a decent proportion of its securities portfolio without incurring much loss," Haire noted.

Like many regional banking stocks, WAL was down roughly 60% since the collapse of three lenders last month sparked contagion fears. What was a $75 stock days before the turmoil hit the sector is now just sub-$30.

More on the Bank Crisis

• Banking Fiasco: Fit Financials With Firm Fundamentals
• Why This Banking Crisis Makes A Recession More Likely
• Fed’s Barr blames management, internal control lapses for Silicon Bank failure
• Western Alliance: A 30%+ Discounted Regional Bank Bargain

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