Why Shares of Western Alliance Popped Today

What happened

Shares of Western Alliance Bancorporation (WAL 0.09%) had jumped by nearly 16.7% as of 10:26 a.m. ET Wednesday after the bank reported earnings results for the first quarter of 2023.

So what

Western Alliance has been one of the banks that investors have been very worried about after several U.S. banks collapsed in March, but its earnings today show stabilization.

Western Alliance reported earnings per share of $1.28 on total revenue of nearly $552 million. Both numbers missed analyst estimates, although on an adjusted basis, earnings would have beaten the predictions.

Perhaps more importantly, deposit levels have been stabilizing. Between the end of 2022 and March 20, the bank's deposits fell from $53.6 billion to $46.7 billion. Since then deposits have rebounded to $49.6 billion. Western Alliance had exposure to the tech and innovation sector, which has been at the center of deposit runs experienced in March.

"Balance sheet repositioning, which included surgical sale of assets and loan reclassifications, resulted in after tax net non-operating charges of $109.7 million, but will have an immediate accretive impact to regulatory capital and allow us to prioritize core client relationships with holistic lending, deposit, and treasury management needs," Western Alliance CEO Kenneth A. Vecchione said in an earnings statement.

Now what

Western Alliance's earnings report is definitely good news for shareholders. Deposits have stabilized, the bank is building capital, and it now has significant liquidity coverage.

From an earnings perspective, the bank did, however, experience margin compression due to higher deposit costs and management expects more compression this year, albeit not as bad as what it experienced during the difficult first quarter.

Even after the bounce, the bank definitely still trades below where it has in the past, although I'd like to get a little more clarity on the company's earnings trajectory. I definitely think nibbling on Western Alliance is valid, but I'd keep it to a small position for now.