Despite a challenging market circumstance, Western Alliance Bancorporation (WAL:NYE) reported first-quarter 2023 results that exceeded analyst expectations. Following the disclosure that deposit balances, which had been affected by the failure of two US banks in early March, had stabilised by the end of the first quarter, the WAL stock increased by nearly 17% in after-hours trading yesterday. Additionally, deposits rose by $2 billion between March 31 and April 14.
The bank’s adjusted earnings per share (EPS) of $2.30 surpassed Wall Street’s estimates of $1.97 and increased by 3.6% year-over-year. In the first quarter, the bank’s adjusted revenues increased by approximately 28% to $712.2 million, exceeding the consensus estimate of $669.86 million.
The bank’s provision for credit losses increased from $9 million to $19.4 million in the first quarter of 2022, primarily due to increased economic uncertainty and a charge-off related to debt security at a financial institution. In contrast, the net interest margin, a key indicator of the bank’s profitability, increased by 47 basis points to 3.79 percent compared to the same period last year.
WAL Stock Forecast:
The consensus rating for WAL stock is Buy, based on nine Buy and four Hold recommendations. The average price target of $68.91 per analyst indicates a substantial upside potential of 80.9%. The current price-to-earnings ratio of 3.4x is 64.6% lower than the five-year average of 9.6x. Overall, the stock appears to be underpriced, and investors may view this as a buying opportunity.
Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It operates through Commercial and Consumer Related segments.
Further, it holds certain investment securities, municipal and non-profit loans, and leases; invests primarily in low-income housing tax credits and small business investment corporations; and holds certain real estate loans and related securities. Western Alliance Bancorporation was founded in 1994 and is headquartered in Phoenix, Arizona.