Specialist
Former banker at Western Alliance Bancorp
Agenda
- Current operating environment for Western Alliance Bank (NYSE: WAL), highlighting its ability to withstand current pressure on the regional banking sector
- Analysis of Western Alliance's current exposure to shiftier deposits against its current liquidity funding scheme
- Western Alliance's AUM (assets under management) target and acquisition strategy
- 2023 outlook for Western Alliance and the US regional bank sector
Questions
1.
Can you give us an overview on how Western Alliance Bank’s operating environment has evolved over the recent week-and-a-half following the uncertainty kicked off by SVB [Silicon Valley Bank] on 8 March 2023?
2.
Might Western Alliance potentially be affected by the downfalls of Silvergate, SVB and Signature Bank simply through the existence of its Bridge Bank division? What implications should we be watching out for? The company’s market performance has been low.
3.
The forthcoming 22 March 2023 Federal Reserve announcement on interest rates is slated to be huge. What do you predict will be the implications of that rate increase announcement on the ongoing regional bank crisis?
4.
Could you identify the drivers behind Western Alliance’s negative market performance? That still seems to be a reality.
5.
Western Alliance shared a proportion of unrealised losses similar to other banks, but its losses were not as intense as others’. Given how the market is currently viewing the bank and factoring in annualised losses on its HTM [held-to-maturity] portfolio, how would you view the possibility that a similar run on its deposits occurs, based on market contagion?
6.
You’ve alluded to this, and it’s been reported in Western Alliance’s 17 March 2023 press release – the bank is experiencing net inflows for deposits and new accounts opening. We can imagine those are coming from recently closed banks. How sticky do you expect those new deposits to be?
7.
Why was Western Alliance viewed as a safer home for customer deposits than larger institutions? Considering its smaller size and small exposure to tech or innovation banking – roughly 45% of uninsured deposits – what made that bank still attract deposits as a safe haven?
8.
One could assume that many of the deposits that Western Alliance Bank attracted contain the same high beta attributive to VC-backed or tech firms. Do you think the bank has the risk management talent to navigate the impact of elevated deposits on its ALM [asset and liability management] strategy?
9.
How do you expect net interest margins to compress, given an increase in deposits and an expected increase in deposit pricing as a result of today’s more competitive deposit market, and how long do you think that trend will hold?
10.
How do you expect the composition of deposits coming out of the technology and innovation group at Western Alliance evolving over the next period? As of 16 March 2023, deposits within tech and innovation represented less than 8% of total deposits. Do you expect management to hold its ground on this segment, or do you think the bank will look to reduce its concentration of deposits in that segment?
11.
What sort of news would we have to hear to expect a possible run on deposits sooner than the rest? What triggers that for Western Alliance?
12.
Runs are fear-driven. When trying to assess the chance of something similar happening at Western Alliance, we need to factor in the chance of this happening elsewhere. You’ve alluded to roughly 183 banks with a significant amount of unrealised losses, based on their held-to-maturity portfolios. What’s your outlook for something similar occurring somewhere else, which would seem to have implications for Western Alliance?
13.
You mentioned commercial real estate. Given your expectations for how the lending landscape is going to evolve, can you give us your thoughts there?
14.
How long do you see the current environment playing out for?
15.
How do you see loan-to-deposit ratios evolving for Western Alliance as well as the rest of this segment during this period?
16.
Can you walk us through how the competitive landscape has changed for players in the same categories as Western Alliance?
17.
Do you think all this talk about diversification marks the end to regional banks overly concentrating on one specific segment? Who should we be worrying about, and what are these banks doing to change and adapt to this environment? Is reducing a concentration or a silo part of that?
18.
What type of profile do you think Western Alliance is going to target for acquisitions?
19.
What was missing or lacking from Western Alliance’s offerings, during your tenure, that it might now look to fortify through an acquisition? You mentioned the bank looks at profiles with strong assets, but is there a specific hole in its service offerings that it could look to fill through an acquisition?
20.
Could you see Western Alliance making a move on Silicon Valley or Signature Banks’ loan books, which are still up for sale?
21.
Can you walk us through why Texas Capital or Zions could be among Western Alliance’s target profiles?
22.
Can you walk us through your 6-12-month outlook for Western Alliance? What are your best- and worst-case scenarios?
