Q2 2024 Earnings Summary
Reported on Feb 18, 2025 (After Market Close)
Pre-Earnings Price$76.72Last close (Jul 19, 2024)
Post-Earnings Price$76.72Last close (Jul 19, 2024)
Price Change
$0.00(0.00%)
- Western Alliance Bank's warehouse lending group has become the premier platform in the industry, leading to significant deposit growth and market share gains. The bank has seen strong growth in deposits, with 58% of growth coming from deposit-only channels and an additional $673 million from its consumer digital platform in Q2. The consumer digital platform has grown to $4.5 billion in deposits within 1.5 years. ( , , )
- The bank expects to maintain its net interest margin around 3.60% for Q3 and Q4 despite two expected rate cuts, due to strategic deployment of excess liquidity and paying down short-term borrowings. Net interest income is projected to rise in Q3 and remain flat in Q4, supported by continued loan growth and development of fee-based income channels. ( , )
- Maintaining a stable outlook on the credit portfolio, Western Alliance is proactive in managing non-performing loans, with an optimistic view on asset quality. The bank plans to use earnings to fund loan growth in low or no loss loan categories, aiming to propel EPS growth over the long term. They are maintaining their CET1 capital ratio at 11%, prioritizing growth over share buybacks. ( , )
- Expected increase in net charge-offs due to challenges in commercial real estate loans. The bank expanded its net charge-off guidance from "15% upper limit" to 15% to 20% due to taking back a San Diego property via foreclosure, indicating potential asset quality issues in its CRE portfolio. ,
- Uptick in special mention loans may indicate deteriorating asset quality. The bank acknowledged a slight increase in special mention loans due to "idiosyncratic or specific deal situations," though they stated it's still below trailing fourth-quarter averages. This could signal emerging credit risks.
- Dependence on higher-cost warehouse lending deposits (ECR deposits) and potential deposit outflows. Strong growth in warehouse lending deposits, which carry a higher Earnings Credit Rate (ECR), has increased the bank's interest expense. The bank is attempting to push the rate downward, which may be challenging. Additionally, these deposits are subject to significant seasonal outflows of $3 billion to $4 billion in Q4, which could impact liquidity. , ,