| Snowflake Score | |
|---|---|
| Valuation | 6/6 |
| Future Growth | 4/6 |
| Past Performance | 4/6 |
| Financial Health | 6/6 |
| Dividends | 2/6 |
WAL Stock Overview
Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada.
Western Alliance Bancorporation Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$82.92 |
| 52 Week High | US$124.93 |
| 52 Week Low | US$68.41 |
| Beta | 1.42 |
| 1 Month Change | 5.31% |
| 3 Month Change | 11.38% |
| 1 Year Change | -12.80% |
| 3 Year Change | 96.77% |
| 5 Year Change | 72.75% |
| Change since IPO | 226.46% |
Recent News & Updates
Western Alliance Bancorporation: Strong Growth On The Cards
The loan book is unlikely to continue to grow at the second quarter's outstanding rate. However, the growth rate will continue to remain at a remarkably high level. Thanks to sticky deposit costs, the topline is moderately rate sensitive. Provisioning will likely trend higher mostly on the back of substantial loan additions. The December 2022 target price suggests a high upside from the current market price. However, WAL is offering a low dividend yield. Earnings of Western Alliance Bancorporation (WAL) will most probably continue to surge in the next few quarters due to remarkable loan growth. Further, slight margin expansion will support revenues. On the other hand, higher provisioning will restrict earnings growth. Overall, I am expecting Western Alliance Bancorporation to report earnings of $10.0 per share for 2022, up 15% year-over-year. Compared to my last report on the company, I haven't changed my earnings estimate much. For 2023, I'm expecting earnings to grow by a further 17% to $11.7 per share. The year-end target price suggests a high upside from the current market price. Therefore, I'm maintaining a buy rating on Western Alliance Bancorporation. Loan Growth Likely to Decelerate After a Phenomenal Second Quarter Western Alliance Bancorporation reported outstanding loan growth of 18.2% in the second quarter of 2022, or 72.8% annualized. What is most impressive is the fact that this growth was mostly organic, with only a small part attributable to accounting measures. Western Alliance shifted $1.9 billion (4% of loans) from held-for-sale to held-for-investment loans. Within the organic loan growth, the commercial and industrial segment, C&I, was the biggest driver of loan growth. The second quarter's loan growth can obviously not be sustained as it's an anomaly. Further, interest rates are likely to peak later this year before declining next year. Such an interest rate outlook will encourage borrowers to put off some of their less urgent borrowing plans until next year. On the other hand, strong job markets will support loan growth. Western Alliance is a nationwide lender; therefore, the national unemployment rate is a suitable indicator of credit demand for the company. The job market is near full employment and at record lows, as shown below. US Unemployment Rate data by YCharts The management mentioned in the conference call that it expects loans and deposits to grow in excess of $2 billion per quarter. Part of the management’s confidence is attributable to robust loan pipelines. Considering the factors given above and the management’s guidance, I'm expecting the loan book to increase by 36% in 2022. In my last report on Western Alliance, I estimated loan growth of 21% for this year. I've revised upwards my loan growth estimate for the year mostly because of the portfolio's phenomenal performance during the second quarter of 2022. For 2023, I'm expecting loan growth to return to a more normal level. Meanwhile, I'm expecting other balance sheet items to grow mostly in line with loans. The following table shows my balance sheet estimates. FY18 FY19 FY20 FY21 FY22E FY23E Financial Position Net Loans 17,558 20,934 26,774 38,823 52,870 61,850 Growth of Net Loans 17.4% 19.2% 27.9% 45.0% 36.2% 17.0% Other Earning Assets 4,087 4,307 8,009 13,526 13,524 13,935 Deposits 19,177 22,796 31,931 47,612 57,816 66,345 Borrowings and Sub-Debt 874 410 554 2,414 6,004 6,248 Common equity 2,614 3,017 3,414 4,668 5,169 6,275 Book Value Per Share ($) 24.8 29.3 34.0 44.7 48.0 58.3 Tangible BVPS ($) 22.0 26.4 31.0 38.6 41.5 51.8 Source: SEC Filings, Earnings Releases, Author's Estimates (In USD million unless otherwise specified) Margin Moderately Rate Sensitive Thanks to Sticky Deposit Costs The proportion of non-interest-bearing deposits in total deposits dipped in the second quarter. Nevertheless, non-interest-bearing deposits still constitute a large part of the deposit book. According to details given in the 10-Q filing, non-interest-bearing deposits made up 44.2% of total deposits at the end of June 2022, compared to 45.1% at the end of March 2022, and 44.8% at the end of December 2021. These deposits will make the average deposit cost upwards sticky in a rising-rate environment. The anticipated strong loan growth discussed above will likely further support the margin. The results of the management's interest-rate sensitivity analysis given in the earnings presentation showed that a 100-basis points hike in interest rates could boost the net interest income by 5.3% over twelve months. Western Alliance Bancorporation's 2Q 2022 Presentation Considering these factors, I'm expecting the margin to increase by 18 basis points in the second half of 2022 before stabilizing next year. Loan Additions to Drive Provisioning Western Alliance reported an unusually large net provision expense for the second quarter of 2022, mostly because of the extraordinary loan additions during that quarter. Portfolio additions will most probably continue to be the leading source of provisioning for the next few quarters. In addition, the heightened interest rates, and the resultant increase in borrowing costs for variable-rate loans will worsen the portfolio's asset quality. Moreover, the possibility of a recession will demand further provisioning. On the plus side, around 27% of the loan portfolio is credit protected, including government guarantees, as mentioned in the earnings presentation. Overall, I’m expecting the net provision expense to make up around 0.24% of total loans (annualized) in the second half of 2022 and 0.13% of total loans in 2023. In comparison, the net provision expense averaged 0.11% of total loans from 2017 to 2019. In my last report on Western Alliance Bancorporation, I estimated a net provision expense of $30 million for 2022. In comparison, I'm now expecting a net provision expense of $97 million. I've revised upwards my provisioning estimate because of stronger loan growth than previously expected. Further, a greater-than-expected deterioration in the economic outlook has pushed up my estimate. Earnings to Grow by 15% The remarkable loan growth and slight margin expansion will play a pivotal role in boosting earnings this year and the next. On the other hand, higher provisioning expenses will likely drag earnings growth. Overall, I'm expecting Western Alliance to report earnings of $10.0 per share for 2022, up 15% year-over-year. For 2023, I'm expecting the company to report earnings of $11.74 per share, up by 17% year-over-year. The following table shows my income statement estimates. FY18 FY19 FY20 FY21 FY22E FY23E Income Statement Net interest income 916 1,040 1,167 1,549 2,173 2,567 Provision for loan losses 23 19 124 (21) 97 80 Non-interest income 43 65 71 404 391 385 Non-interest expense 426 483 492 851 1,109 1,275 Net income - Common Sh. 436 499 507 896 1,077 1,265 EPS - Diluted ($) 4.14 4.84 5.04 8.67 10.00 11.74 Source: SEC Filings, Earnings Releases, Author's Estimates (In USD million unless otherwise specified) In my last report on Western Alliance, I estimated earnings of $9.92 per share for 2022. I haven't changed my earnings estimate much because the upward revision in loan growth estimate cancels out the upward revisions of operating and provisioning expenses.
Western Alliance Bancorporation (NYSE:WAL) Will Pay A Larger Dividend Than Last Year At $0.36
The board of Western Alliance Bancorporation ( NYSE:WAL ) has announced that it will be increasing its dividend by 2.9...
Shareholder Returns
| WAL | US Banks | US Market | |
|---|---|---|---|
| 7D | -3.1% | 1.6% | 1.4% |
| 1Y | -12.8% | -7.2% | -8.4% |
Return vs Industry: WAL underperformed the US Banks industry which returned -7.2% over the past year.
Return vs Market: WAL underperformed the US Market which returned -8.4% over the past year.
Price Volatility
| WAL volatility | |
|---|---|
| WAL Average Weekly Movement | 5.4% |
| Banks Industry Average Movement | 3.6% |
| Market Average Movement | 7.6% |
| 10% most volatile stocks in US Market | 17.1% |
| 10% least volatile stocks in US Market | 3.1% |
Stable Share Price: WAL is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: WAL's weekly volatility (5%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1994 | 3,139 | Ken Vecchione | https://www.westernalliancebancorporation.com |
Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It operates in Commercial, Consumer Related, and Corporate & Other segments. The company offers deposit products, including checking, savings, and money market accounts, as well as fixed-rate and fixed maturity certificates of deposit accounts; and treasury management and residential mortgage products and services.
Western Alliance Bancorporation Fundamentals Summary
| WAL fundamental statistics | |
|---|---|
| Market Cap | US$8.90b |
| Earnings (TTM) | US$973.30m |
| Revenue (TTM) | US$2.22b |
9.1x
P/E Ratio1.9x
P/B RatioIs WAL overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| WAL income statement (TTM) | |
|---|---|
| Revenue | US$2.22b |
| Cost of Revenue | US$0 |
| Gross Profit | US$2.22b |
| Other Expenses | US$1.25b |
| Earnings | US$973.30m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 9.06 |
| Gross Margin | 100.00% |
| Net Profit Margin | 43.78% |
| Debt/Equity Ratio | 123.6% |
How did WAL perform over the long term?
See historical performance and comparison