Western Alliance Bancorp WAL Investors have rejoiced with the stock up 3% since the company reported strong results.
The bank delivered a surprise of 3.61% on EPS and 4.56% on revenue as it reported first-quarter numbers on April 18 after the market close.
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The Western Alliance analyst
JPMorgan analyst Steven Alexopoulos, CFA has an Overweight rating on the stock with an $80 price target. “As the company achieves financial goals, we expect strong growth to continue into 2024 and 2025,” he said. stated.
The stock trades at an attractive valuation of 7.0x 2024e EPS and a high implied cost of capital. Western Alliance offers investors the opportunity to capitalize on its growth potential. Alexopoulos continues to “see more upside potential than his peers” with Western Alliance stock.
The thesis of the Western Alliance
Alexopoulos suggests that the Western Alliance is poised for continued growth. With recent first quarter results showing strong momentum and the bank achieving key financial targets, it is positioned to outperform its peers in the coming years.
Strategic efficiency and notable results
In the aftermath of the challenges faced over the past year – including navigating through market volatility and economic uncertainty – Western Alliance has executed its strategy effectively. The bank has focused on increasing its capital and liquidity levels, laying a solid foundation for future growth, the analyst notes.
The bank’s first quarter earnings further demonstrate solid performance, with notable results such as:
- a decrease in the loan/deposit ratio to 82%
- a Common Equity Tier 1 (CET1) ratio that reaches the target of 11%.
- Deposit growth accelerated, with period-end balances up 50% year-over-year, approaching $7 billion quarter-over-quarter
Once these financial goals are achieved, Alexopoulos expects Western Alliance to maintain its strong growth trajectory throughout 2024 and 2025.
Despite projections of modest loan and deposit growth, the bank has the potential to exceed these targets, leveraging its diverse business verticals and improved risk profile.
Positioned to benefit from rate cuts
Furthermore, the Western Alliance is well positioned to benefit from future Federal Reserve rate cuts. As interest rates decline, the bank expects to see an increase in loan demand, further strengthening its loan growth outlook. Additionally, Western Alliance expects lower deposit costs on its ECR deposits, which will cushion the impact of reduced asset yields, Alexopoulos notes.
Looking ahead, the analyst outlines optimistic projections for Western Alliance in 2024. He sees an increase in loans held for investment (HFI) of $4 billion per year and a surge in deposits of $11 billion per year . Net interest income and fee income are also expected to increase, supported by “numerous tailwinds,” while expenses, including ECR deposit costs, are expected to increase moderately.
Western Alliance Bancorp stands out as a “first choice” in the banking industry, poised to deliver superior growth and sustained value creation for shareholders.
WAL Price Action: Western Alliance shares were up 2.3% at $58.77 on Monday at the time of publication.
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