Western Alliance Bancorp pared earlier declines after saying deposits shrank less than some analysts had estimated and that money was flowing back into the bank.
(Bloomberg) — Western Alliance Bancorp pared earlier declines after saying deposits shrank less than some analysts had estimated and that money was flowing back into the bank.
Deposits were down 11% in the first quarter to $47.6 billion, but balances have increased so far this month, cutting this year’s decline to 9%, according to a regulatory filing from the company. The disclosure eased concern about a statement from Western Alliance late Tuesday that updated the bank’s financial status without including the deposit figure.
“Investors were disappointed by the amount of detail initially given out,” Adam Crisafulli, an analyst at Vital Knowledge, said in a note to clients. “But this new color should be received well by the market.”
The shares fell 12% to $29.37 Wednesday, after dropping as much as 19% earlier in the day. While this still leaves the shares far below the $122.35 reached in January 2022, Brandon King at Truist Securities said the current price reflects a worst-case scenario.
“The deposit situation is better than feared,” King wrote in a note. “While earnings are under material near-term pressure, we think the stabilization of deposit pressures should allay investor concerns of severe deposit outflows.”
US regional banks have been in turmoil after a run on deposits struck several lenders. Their stocks have been wobbling after rising interest rates depressed the value of bonds they bought when rates were low, and a sudden surge in customer withdrawals forced some of them to sell those assets at a loss. Deposits at smaller US banks slumped $120 billion in the week through March 15, while those for the 25 largest firms rose almost $67 billion, Federal Reserve data show.
Outflows at US lenders more broadly continued the following week, with $125.7 billion withdrawn, though smaller banks posted a slight increase. Many customers are also shifting their funds to higher-yielding alternatives, adding to the pressure on regional banks.
‘Significant Inflows’
Western Alliance, led by Chief Executive Officer Kenneth A. Vecchione, provides commercial and consumer loans. The bank has repeatedly sought to reassure investors, saying on March 10 that “deposits remain strong,” and again on March 17, when it said net outflows have fallen sharply, “including significant inflows and new account openings.”
“The bank experienced elevated net deposit outflows surrounding the announcements of the Silicon Valley Bank and Signature Bank closures in mid-March,” Phoenix-based Western Alliance said in its latest filing Wednesday. The withdrawals were “concentrated primarily in our Technology and Innovation and Settlement Services groups, with net outflows falling sharply and returning to normalized levels by March 17.”
The bank also said that deposit balances had “stabilized” as of March 20 and grown $900 million between then and the end of the quarter. Between March 31 and April 4, deposits have grown an additional $1.2 billion, the bank said. A representative for Western Alliance said the bank wouldn’t elaborate beyond the latest filing.
In its Tuesday statement, the bank said insured deposits represented about 68% of the total as of March 31. That was higher than the 55% the bank disclosed as of March 16, according to Bloomberg Intelligence, which also pointed to liquidity levels sufficient to cover a “healthy” 140% of uninsured deposits.
In the same update, Western Alliance said it had no borrowings outstanding from the Federal Reserve’s discount window “after balance sheet repositioning,” and its CET1 ratio is expected to be “materially consistent with year-end 2022.”
Unrealized losses on securities-held-for-investment loans improved to $2.9 billion on a pretax basis from $4.2 billion at the end of 2022 “primarily due to lower interest rates,” the company said in the statement. Residential loans are the primary contributor to unrealized losses on the bank’s held-for-investment loans, it said.
David Chiaverini, an analyst at Wedbush Securities Inc., had estimated that deposits at Western Alliance could have dropped about 15% in the first quarter, compared with a prior estimate of a 9% decline.
(Updates with closing share price in fourth paragraph.)
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