Western Alliance Bancorporation (WAL) Earnings & Analysis

Latest quarter

Western Alliance reported adjusted earnings per share of $2.45 for the third quarter, above the consensus of $2.43. On the basis used by the consensus, revenue was $1.0 billion, above the $989.0 million estimate. The company also reported revenue of $1.5 billion, compared with $1.4 billion a year earlier; the filing separately reported net revenue of $1.0 billion, up from $938.2 million.

The filing shows diluted earnings per share rose to $2.45 from $2.28. Net interest income increased to $807.6 million from $750.4 million, which the company attributed to higher average interest-earning assets and lower rates on interest-bearing deposits. Net interest margin rose to 3.57% from 3.53%.

The company attributed higher noninterest income to commercial banking fees and securities gains, partly offset by lower gains on mortgage originations and sales. Noninterest expense rose to $595.1 million from $544.4 million, primarily reflecting higher salaries and benefits. Western Alliance reported a $80.0 million provision for credit losses, unchanged from the year-earlier quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Kenneth Vecchione said Western Alliance entered the quarter focused on credit quality, deposit costs and repurchases. He said nonaccrual loans fell 14% from the prior quarter to $485 million, and that the bank had resolved two more of the credits identified at its investor day. The remaining two were on a path to resolution before year-end, he said.

Vecchione said the bank transitioned $3 billion of higher-cost deposits during the quarter while keeping total deposits essentially flat, supported by $1.8 billion of commercial banking deposit growth. CFO Vishal Idnani said deposit costs fell $14 million from the prior quarter as the bank reduced balances tied to earnings credits, which can offset customer banking charges.

Idnani said mortgage production fell 4% and rate-lock volume fell 14% year over year, while gain-on-sale margins remained at 27 basis points. He said private-label securitization supported secondary-market revenue as rates pressured origination volumes and margins. On investment, Idnani said the bank added staff for lower-cost deposit channels and new AI initiatives and converted technology consultants to employees, which it expected to reduce contractor expense.

Asked about the fourth-quarter margin, Vecchione said seasonal mortgage-related deposit outflows require the bank to replace deposits with more expensive borrowings. Idnani said net interest income in dollars should nevertheless rise slightly from the third quarter. Asked about expenses, he said costs excluding deposit fees would decline in the fourth quarter and that the third quarter was “not the new run rate to grow expenses off of.”

In response to a question about how far nonperforming loan resolutions could go, Idnani said he would address the coming quarter rather than quantify the full year. He said the bank had “a high degree of confidence” that nonperforming loans would fall from their $485 million level by year-end.

Guidance

Vecchione said Western Alliance now expects at least $5 billion of deposit optimization by year-end, versus $3 billion previously, and lowered its deposit growth outlook from $6 billion to $3.5 billion to $4 billion. He said the bank also reduced its loan growth outlook by $1 billion.

For 2026, Vecchione lowered expected net interest income growth to 11% to 12% from 12% to 14%, while raising expected noninterest income growth to 18% to 21% from 13 to 17%. He said the bank lowered the upper end of its deposit cost guidance to a range of $650 million to $675 million.