Western Alliance Posts Q3 Earnings Miss, Why 5 Analysts Are Still Bullish

Western Alliance Bancorporation WAL reported mixed earnings for its third quarter on Thursday.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

RBC Capital Markets On Western Alliance Bancorporation

Analyst Jon Arfstrom reiterated an Outperform rating and price target of $99.

Western Alliance reported earnings of $1.80 per share, missing Street expectations of $1.89 per share, Arfstrom said in a note. "In total, this was a decent quarter for the company," although there were headwinds like higher ECR (earnings credit rates) costs, slower loan growth, and the MSR (mortgage servicing right) change, he added.

Despite this, the analyst stated that the company generated strong revenues of $823 million, beating consensus of $807 million. Western Alliance expects ECR-related deposit balances to decline in the fourth, "which should help meaningfully reduce these costs," he further wrote.  

Stephens On Western Alliance Bancorporation

Analyst Andrew Terrel maintained an Overweight rating and price target of $102.

Western Alliance's PPNR (pre-provision net revenue) of $282.6 million missed consensus by 7.6%, with a net interest income beat being offset by higher-than-expected expenses, mainly on higher ECR deposit costs, Terrel said.

"Taken at the midpoint, we estimate the guide collectively implies ~6% PPNR downside in 4Q vs. our prior forecast, although downside to consensus appears more muted at -4%," the analyst stated. "The bar was somewhat high coming into the print given recent performance and, with that in mind, we believe shares could trade down modestly post the quarter," he added.

Check out other analyst stock ratings.

Piper Sandler On Western Alliance Bancorporation

Analyst Matthew Clark reaffirmed an Overweight rating and price target of $102.

Western Alliance's reported earnings of $1.80 per share and operating earnings of $1.81 per share missed the consensus of $1.89 per share, Clark said. Higher NIE (net interest expenses) partly offset stronger net interest income and fees.

Management's updated full-year guidance "implies some downside to Street estimates," the analyst wrote. While reiterating loan growth guidance of $4.5 billion, management cut their deposit growth projection from $14 billion to $11 billion, he added.

Truist Securities On Western Alliance Bancorporation

Analyst Brandon King reiterated a Buy rating and price target of $100.

Western Alliance's adjusted PPNR of $285.7 million missed Street expectations by 6%, primarily due to "higher expenses (ECR deposit costs) offset partially by higher revenue," King said. The upside in net interest income was driven by strong deposit growth of $1.8 billion, loan growth of $916 million, and borrowings declining by $2.6 billion, he added.

The company net interest margins contracted by 2 basis points (bps) to 3.61%, missed Street expectations, "as loan yields decreased 14bp and cost of funds decreased 12bp," the analyst stated. "Updated management guidance for FY 2024 was mixed, reflecting lower deposit growth, lower NII growth, higher fees, and higher expenses," he further wrote.

JPMorgan On Western Alliance Bancorporation

Analyst Anthony Elian maintained an Overweight rating on the stock.

The third-quarter earnings miss was driven by higher-than-expected ECR deposit costs that were "tied to higher average ECR deposit balances," which grew around $3 billion sequentially to $27.8 billion, Elian said.

Although ECR deposit costs grew by 20% in the third quarter, they are expected to decline by 25% in the fourth quarter, due to "the full quarter impact of the Fed's September rate cut as well as seasonally lower balances for Mortgage Warehouse clients," the analyst stated.

WAL Price Action: Shares of Western Alliance Bancorporation were down 7.8% to $86.55 at the time of publication Friday.

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