Is Western Alliance Bank in Trouble with Its Deposit and Loan Trends?

Western Alliance Bank's deposit and loan trends have raised some red flags. The bank's total deposits have been steadily increasing, up 24% in the past year, but this growth is largely driven by a surge in non-interest bearing deposits, which now make up 60% of its total deposits.

This shift towards non-interest bearing deposits is a concern, as it can be a sign of decreased customer confidence in the bank's investment options. Additionally, the bank's loan growth has been slower, with a 5% increase in the past year, which is below the industry average.

The bank's loan-to-deposit ratio has also been decreasing, from 83% to 75% in the past year, indicating that the bank may not be using its deposits efficiently. This could be a sign of a lack of confidence in the bank's ability to lend effectively.

The bank's management has acknowledged the challenges it faces, stating that it is working to improve its loan growth and increase its lending capacity.

Related reading: Bank Deposits down

Western Alliance Bancorporation's stock opened on Monday, March 13, down 74% from its Friday closing price, losing nearly two-thirds of its market value over the previous three trading sessions.

The bank's diverse deposit base and broader range of commercial banking customers likely saved it from the same headaches Silicon Valley Bank encountered, which led to its failure.

Western Alliance rapidly protected itself by raising its insured deposits and the cash it kept on hand to pay uninsured depositors when it saw signs of financial distress.

The bank borrowed $25 billion from the Federal Reserve Board after SVB and Signature failed, and although it had to weather an almost $7 billion loss of deposits, its deposit base stabilized at $46.7 billion by March 20.

Western Alliance denied reports that it's exploring a sale or has hired an advisor to explore strategic options, calling the Financial Times' article "categorically false in all respects."

The bank's shares are down about 68% for the year and currently trade at about $19 per share, making it a potentially undervalued investment opportunity.

Western Alliance has a more diverse deposit base and a broader range of commercial banking customers compared to Silicon Valley Bank, which relied heavily on early-stage tech and biotech depositors.

The bank's shares plummeted 83% to $7.84 on Monday, following a 21% slide on Friday, as investors fret about banks' health.

Western Alliance has made a statement about its "strong" finances, but its shares are still getting hammered due to concerns about the banking sector's instability.

Here's a summary of the bank's key statistics:

Western Alliance's liquidity and deposits "remain strong" according to its updated financial statement, but investors are still wary due to the recent failures of Silicon Valley Bank and Signature Bank.

Western Alliance Bank's performance has been under scrutiny in recent days, and for good reason. Its shares plummeted over 80% in premarket trading after the failure of Silicon Valley Bank.

The bank's stock price has been hit hard, falling 83% to $7.84 on Monday. This is a significant drop, and it's likely to be a concern for investors.

Despite efforts to ease investor concerns, Western Alliance Bank's shares continue to fall. This is part of a broader trend affecting smaller lenders, with First Republic Bank shares tumbling 78% and PacWest Bancorp down 53% on Monday.

Here's a summary of the recent performance of some regional banks:

Western Alliance Bank's liquidity and deposits do appear to be strong, with $61.5 billion in total deposits and $2.5 billion in cash on its balance sheet. However, this may not be enough to offset the concerns of investors.

Interest rates have been a major factor in the recent struggles of regional banks.

Rising interest rates engineered by the Federal Reserve have put pressure on many banks.

So far this year, three banks have failed, compared to no failures in 2021 or 2022.

The Federal Reserve Chairman, Jay Powell, has tried to ease concerns about banks, saying conditions have improved since early March and that the system overall is sound.

About 74% of Western Alliance Bank's deposits are insured by the FDIC, which is a significant amount.

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Western Alliance Bancorp's stock has taken a hit, plummeting 83% to $7.84 on Monday. The Arizona-based bank's stock was already down 21% on Friday.

Shares in smaller lenders are also falling, with First Republic Bank down 78% and PacWest Bancorp down 53% on Monday. These banks are feeling the pressure after Silicon Valley Bank's sudden failure.

The US Treasury, Federal Reserve, and FDIC made a joint statement late Sunday to calm nerves, saying they would make all depositors in SVB and Signature whole. They also set up a new facility, the Bank Term Funding Program, to provide liquidity for banks under stress.

Here's a look at the stock performance of some of the affected banks:

The failure of SVB has left many investors worried about the health of other banks, and the stock performance of these smaller lenders reflects that concern.