Western Alliance sparks rally in regional bank stocks with news its deposits are recovering

By Steve Gelsi

Banks caught up in the fallout from Silicon Valley Bank's failure were rebounding on Wednesday

Western Alliance Bancorp led a rally in regional bank stocks on Wednesday after the lender said it added $2 billion in deposits from March 31 to April 14.

Adding to the positive sentiment, Wedbush analyst David J. Chiaverini upgraded Western Alliance to outperform -- the equivalent of buy -- and added the stock to the bank's Best Ideas list along with New York Community Bancorp Inc. (NYCB), M&T Bank Corp. (MTB) and Regions Financial Corp. (RF).

Western Alliance stock (WAL) was up 17%, while M&T Bank was up by 1.6%, Regions Financial was up 1.2% and New York Community Bancorp was up fractionally.

Other regional banks also snapped back from losses in recent weeks. Zions Bancorp (ZION) rose 3.2%, First Republic Bank (FRC) was ahead by 1.6% and PacWest Bancorp (PACW) was moving up 6.4%.

Metropolitan Bank Holding Co. (MCB) jumped 15% after it reported first-quarter earnings of $2.25 a share, ahead of the analyst projection of $1.79 a share. Its revenue of $65.5 million fell slightly short of the forecast of $66.4 million.

The KBW Nasdaq Bank Index rose 0.4%, while the S&P 500 dipped 0.3%.

"While we experienced elevated net deposit outflows immediately following the closure of other banks, deposit balances quickly stabilized," Western Alliance said after the closing bell on Tuesday.

Western Alliance stock has been hard-hit in recent weeks after the collapse of Silicon Valley Bank on jitters about a run on deposits.

See now:Silicon Valley Bank: Here's what happened to cause it to collapse

Related:SVB Financial files for Chapter 11 bankruptcy with about $2.2 billion of liquidity

Western Alliance also reported first-quarter earnings of $1.28 a share, below the analyst estimate of $1.95 a share. It took an after-tax net non-operating charge of $109.7 million related to balance-sheet repositioning, including the sale of some assets and loan reclassifications.

Wedbush analyst Chiaverini said his bank's outperform rating is based on the expectation that the company should be able to "successfully navigate through this turbulent time" due to its high level of insured deposits (73%), solid outlook for deposit growth, and prudent liquidity measures.

"Given this backdrop, we believe WAL's valuation is compelling," he said.

After the closing bell on Wednesday, Zions is expected to report first-quarter earnings of $1.53 a share on revenue of $845.2 million.

Also Read: Goldman Sachs's stock falls as profit tops target but revenue falls short

-Steve Gelsi

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04-19-23 1034ET

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