What happened
Shares of bank stocks are rallying today after Western Alliance Bancorporation (WAL 0.39%) issued a positive update on its deposit trends this morning.
Shares of Western Alliance traded more than 10% higher as of 10:20 a.m. ET today. Meanwhile, shares of PacWest Bancorp (PACW) traded nearly 6.7% higher, while shares of KeyCorp (KEY 0.41%) were up more than 4%.
So what
Western Alliance, which has been one of the most pressured bank stocks since the banking crisis began in March, issued an update on deposits this morning, saying that quarter-to-date deposits have grown $1.8 billion from March 31. The bank also said deposits have grown $600 million since its last update on May 2.
Image source: Getty Images.
Total deposits at the bank are now $49.4 billion and Western Alliance also reaffirmed its $2 billion quarterly deposit growth guidance. Roughly 79% of the bank's deposits are now insured by the Federal Deposit Insurance Corp.
The update from Western Alliance comes after the bank faced intense selling pressure last week following media reports that it was weighing a sale, reports that management immediately and fervently denied.
"The continuous operational updates over the past two months, coupled with yesterday's brief dive into core-deposit segment trends, gives us solace that not only will WAL weather the storm, but we find it to be notably better positioned than most peer banks," Hovde Group analyst Ben Gerlinger told Bloomberg today. Gerlinger has been steadfast in maintaining an outperform rating on Western Alliance since the banking crisis began.
Bloomberg Intelligence analysts Herman Chan and Sergio Ferreira said in a research note that Western Alliance has shown "stability amid an uncertain operating backdrop." They added: "We see the bank as well positioned, with $22.6 billion in available liquidity and only about $10 billion in uninsured deposits."
In other news, President Joe Biden and Kevin McCarthy, speaker of the U.S. House of Representatives, seemed to indicate that they were making progress on raising the debt ceiling, which would really help the entire market.
After a meeting between Biden and McCarthy yesterday, Biden told reporters that there was "an overwhelming consensus ... that defaulting on the debt is simply not an option. Our economy would fall into recession." McCarthy, on the other hand, said that he and Biden were still not close to a deal to lift the debt ceiling but that a deal could still be struck by the end of the week.
Now what
It's good to see banks rebounding this week after what looked like indiscriminate selling of bank stocks last week.
The update from Western Alliance is especially heartening because it shows that clients are starting to shake off some of the anxiety they've had over some of these pressured banks and bring their money back.
After this update, I am certainly much more optimistic about Western Alliance and now view the stock as a buy, although it could still be volatile in the near term, which investors should be aware of. I also continue to view KeyCorp to be trading at an attractive entry point. I think PacWest can likely navigate through this difficult period but if I had to pick between PacWest and Western Alliance, I would choose the latter.
