On Monday, Truist Securities adjusted its outlook on Western Alliance (NYSE:WAL) Bancorporation (NYSE:WAL), increasing the price target to $88 from $74, while reaffirming a Buy rating on the stock. The revision reflects an anticipation of higher net interest income (NII), which is expected to be partially offset by increased expenses.
The firm projects a 13% and 12% rise in NII for the years 2024 and 2025, respectively, attributing this growth to an expanding balance sheet, quickening loan growth, and a relatively stable net interest margin (NIM) in the second half of 2024. This stability is expected to continue into 2025, even with the assumption of a 100 basis point reduction in Federal Reserve rates.
Truist Securities has also updated its core earnings per share (EPS) estimates, raising them by 3% for 2024 and 2% for 2025, resulting in a new forecast of $7.37 and $8.77 respectively. The higher NII is the main driver behind this adjustment.
The analysis anticipates flat core pre-provision net revenue (PPNR) in 2024, followed by a significant 20% growth in 2025. This projection is supported by robust loan growth and lower rates on earnings-credit-rate (ECR) deposits, which are expected to enhance operating leverage.
Additionally, the firm's adjusted efficiency ratio forecast stands at 51% for 2024 and improves to 49% for 2025.
The bank's stock is currently seen as undervalued by Truist Securities, trading at 8.7 times the firm's estimated 2025 earnings per share, which represents a 19% discount compared to the KRE index.
The positive outlook is supported by Western Alliance's growth trajectory, profitability that surpasses that of peers, a diversified loan portfolio, and capital levels that are consistent with peer institutions.
In other recent news, Western Alliance Bancorporation has been garnering attention from analysts following its strong second-quarter performance. The bank reported earnings of $1.75 per share and significant increases in core deposits and loans held for investment, which contributed to a rise in net interest income.
DA Davidson, Piper Sandler, and RBC Capital have all raised their price targets for Western Alliance, maintaining positive ratings. DA Davidson set a new target of $90, while Piper Sandler and RBC Capital raised their targets to $93 and $87 respectively.
These changes reflect confidence in Western Alliance's financial performance and strategic initiatives.
The bank's recent financial performance also highlighted that core expenses have been rising at a manageable rate, contributing to an improved efficiency ratio. The bank's credit quality remained relatively stable, with nonperforming loans and provisions experiencing a slight uptick.
Western Alliance has updated its revenue guidance for 2024, projecting higher figures due to anticipated stronger balance sheet growth. The bank expects net interest income to grow between 9-14% and non-interest income to increase by 15-25%, while non-interest expenses are projected to rise by 9-13%.
InvestingPro Insights
As Western Alliance Bancorporation (NYSE:WAL) garners a favorable outlook from Truist Securities, real-time data from InvestingPro underscores several aspects of the bank's financial health and market performance. With a Market Cap of $8.37 billion and a P/E Ratio sitting at 11.55, the bank presents a compelling valuation in the market. The P/E Ratio, slightly adjusted for the last twelve months as of Q2 2024, is at 12.1, reflecting a modest increase and aligning with the positive sentiment from analysts.
InvestingPro Tips highlight that Western Alliance has consistently raised its dividend for 5 consecutive years, showcasing a commitment to returning value to shareholders. Additionally, the bank has delivered a significant return over the last week, with a 9.85% price total return, and an even more impressive 30.03% over the last month. These figures are indicative of the bank's strong performance and may appeal to investors looking for growth in their portfolio.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available that delve into the company's earnings revisions, profitability predictions, and trading positions. To explore these further, visit https://www.investing.com/pro/WAL and remember to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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