The stock of Western Alliance (WAL) surged more than 17% in after hours trading following an announcement that its deposits rose by $2 billion since the end of the first quarter and its percentage of deposits insured by the FDIC increased to 73%.
The disclosures came as the Phoenix-based regional bank unveiled its first-quarter earnings, offering a more detailed look at a firm at the center of last month’s banking crisis and a potential preview of results for other regional lenders.
The Phoenix-based institution was one of many mid-sized banks that came under intense scrutiny following the seizures of and , the 16th- and 29th-largest banks in the US. The stock of Western Alliance, which was 40th largest at the end of 2022, is down more than 45% since the start of the year.
Several other regional banks are due to report first-quarter results in the coming days, including US Bancorp (USB) and Zions (ZION) Wednesday and Truist (TFC) and Comerica (CMA) on Thursday. Investors will be watching to see whether these institutions are being challenged by deposit outflows, slimming margins or slowing loan volumes.
Profits, revenue, loans and deposits at Western Alliance fell when compared to the fourth quarter of 2022, although loans were up when compared to the year-earlier period. It lost a total of $6 billion in deposits during the first quarter, a figure the company disclosed earlier this month as a way of reassuring investors.
It also said earlier in the month that its percentage of deposits covered by the Federal Deposit Insurance Corporation had reached 68% at the end of the first quarter; on Tuesday it said that figure had risen to 73% as of April 14. The FDIC insures up to a limit of $250,000 per account.
What that means is Western Alliance is now less dependent on funding from depositors who are considered a greater flight risk during periods of uncertainty. Silicon Valley Bank was seized by regulators after its depositors pulled $42 billion in one day.
Like many banks, Western Alliance has over the last year benefited from the Federal Reserve’s aggressive rise in interest rates because it allowed the lender to charge more for its loans. Its net interest income, which is the difference between what a bank earns on its loans and pays out on its deposits, jumped more than 35% from the year-earlier period.
The concern now is that those margins could begin to fall across the industry as banks begin to pay more aggressively for deposits and lure new customers with higher rates. And at Western Alliance, this measure dropped more than 5% from the end of the fourth quarter.
Western Alliance is also bracing for more loan losses. It added a $19.4 billion provision for credit losses in the first quarter, up from $3.1 million in the fourth quarter.
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Source: https://finance.yahoo.com/news/western-alliance-stock-surges-after-the-lender-said-deposits-rose-2-billion-212848087.html