On Monday, Piper Sandler adjusted the price target for shares of Western Alliance (NYSE:WAL) Bancorporation (NYSE:WAL), a notable banking institution, reducing it slightly to $101 from the previous $102. The firm maintained its Overweight rating on the bank's stock.
The adjustment follows a revision of the earnings per share (EPS) estimates for the years ahead. The new projections for the EPS are set at $7.10 for 2024 and $9.15 for 2025, a slight decrease from the former estimates of $7.25 and $9.25, respectively. Moreover, Piper Sandler has introduced an EPS estimate of $10.30 for the year 2026.
The price target revision is attributed to an expected increase in non-interest expenses (NIE), which is anticipated to be partially offset by stronger fee income and improved net interest income (NII).
Despite the $1 decrease in the price target, the new target still implies a valuation at 11 times the firm's projected 2025 EPS for Western Alliance. This valuation is noted to be at a discount compared to peer institutions, which are valued at approximately 12.8 times their earnings.
Piper Sandler's commentary highlighted the bank's potential for profitability growth, anticipating an acceleration in pre-provision net revenue (PPNR). The analysis points to Western Alliance's sensitivity to liabilities as a factor that could benefit from rate-related relief in earnings credit rate (ECR) deposit costs. Furthermore, there is an expectation of increased revenue from mortgage banking activities, which could positively impact the bank's financial performance.
The new price target and EPS estimates provide investors with updated guidance on Western Alliance Bancorporation's financial outlook. Piper Sandler's analysis suggests a cautiously optimistic view of the bank's future earnings and stock value, taking into account various financial factors and market conditions that could influence the bank's performance.
In other recent news, Western Alliance Bancorporation reported a steady third-quarter performance with earnings per share (EPS) of $1.80, substantial deposit growth of $1.8 billion, and loan growth of $916 million.
Despite a slight compression in net interest margin, the bank noted a 25% increase in net interest income. Following these results, Citi raised its price target for Western Alliance to $102, maintaining a Buy rating, while Barclays (LON:BARC) reduced its price target to $105, but kept an Overweight rating.
These adjustments come after the bank's earnings report, which fell slightly short of consensus and Barclays' expectations, mainly due to higher expenses related to Earnings Credit Rate (ECR). However, Western Alliance's core fee income exceeded expectations. Looking ahead, the bank anticipates fourth-quarter loan growth at approximately $1.25 billion, with a projected decrease in deposits by $2 billion due to seasonal outflows.
Citi predicts a decrease in Western Alliance's GAAP expenses in the upcoming year, based on an expected 22% reduction in ECR deposit costs in 2025. The bank is also expected to achieve significant operating leverage due to lowered expenses, even with anticipated increases in compensation and investments in infrastructure.
These recent developments reflect Western Alliance Bancorporation's strategic focus on diversifying its loan portfolio and maintaining strong customer relationships.
InvestingPro Insights
Western Alliance Bancorporation's financial metrics and market performance offer additional context to Piper Sandler's analysis. According to InvestingPro data, the bank's market capitalization stands at $9.33 billion, with a P/E ratio of 14.51, suggesting a relatively modest valuation compared to the broader market. This aligns with Piper Sandler's observation of WAL trading at a discount to its peers.
The bank's revenue growth of 12.72% over the last twelve months and a strong operating income margin of 39.17% indicate robust financial performance, supporting the potential for profitability growth highlighted in the analysis. Moreover, WAL's return on assets of 0.95% suggests efficient use of its asset base.
InvestingPro Tips reveal that Western Alliance has raised its dividend for 5 consecutive years, demonstrating a commitment to shareholder returns. This is further supported by a current dividend yield of 1.73%. The bank's stock has also shown impressive performance, with a 107.57% total return over the past year and a 50.49% return over the last six months, reflecting strong investor confidence.
It's worth noting that InvestingPro offers 8 additional tips for Western Alliance Bancorporation, providing investors with a more comprehensive analysis of the company's prospects and challenges.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.