Yahoo Finance Western Alliance Bancorp (WAL) Q1 2024 Earnings Call Transcript Highlights: Key Financial ...
Deposit Growth: $6.9 billion increase.
CET1 Capital Target: Reached 11%.
Loan-to-Deposit Ratio: Reduced to 81% from 91%.
Insured Deposit Ratio: Increased to 81%.
Unencumbered Securities and Cash: Increased by $6.5 billion.
Earnings Per Share: $1.72, excluding FDIC special assessment.
Net Income: $191 million, excluding FDIC special assessment.
Pre-Provision Net Revenue (PPNR): $265 million, excluding FDIC special assessment.
Net Interest Income: Increased by $7 million to $599 million.
Noninterest Income: $130 million, up $39 million from previous quarter.
GAAP Noninterest Expense: $482 million, or $464 million excluding FDIC special assessment.
Loan Growth: Held-for-investment loans grew $403 million to $50.7 billion.
Tangible Book Value Per Share: Increased by $0.58 to $47.30.
Net Loan Charge-Offs: $9.8 million or 8 basis points of average loans.
Provision Expense: $15 million.
Nonperforming Assets: Increased $126 million to $407 million.
Release Date: April 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Looking at the guidance with the expense growth primarily coming from the ECR. Why wouldn't that also help drive a higher expectation for NII? A: Dale M. Gibbons, CFO, explained that while the ECR growth does help drive NII, the growth came in gradually over the first quarter, and they haven't fully ramped up the origination of quality credit to disperse those additional funds, which is expected to catch up in the second quarter. Kenneth A. Vecchione, CEO, added that the previous guidance included four rate cuts, now revised to two, offset by increased loan growth projections.
Q: How should we think about the desire to grow capital now that you're at the target floor of 11%? A: Kenneth A. Vecchione, CEO, stated that they see capital remaining modestly at or above 11% for the remainder of the year. Increased loan growth will absorb the excess capital formation. Dale M. Gibbons, CFO, mentioned that they've gained about 40 to 50 basis points in CET1 from the runoff of credit-linked notes.
Q: Can you provide insights on the loan and deposit growth numbers? A: Kenneth A. Vecchione, CEO, mentioned that while cautious about future economic activity, they believe they can actively grow loans by $1 billion per quarter based on the current pipeline. He highlighted that they are deemphasizing certain asset classes like CRE office and residential but see opportunities in warehouse lending and regional C&I business.
Q: Does the expense guide include the $17 million FDIC assessment for this year? A: Dale M. Gibbons, CFO, clarified that the FDIC special assessment is not included in their numbers and their adjusted efficiency is expected to be in the low 50s, working down towards the high 40s.
Q: How should we think about Western Alliance's growth appetite now that you've reached your targets? A: Kenneth A. Vecchione, CEO, explained that they aim to maintain an 80% to 85% loan-to-deposit ratio going forward. They plan to use incremental liquidity to pay down borrowings, which will also moderate the growth of the balance sheet.
Q: What drove the uptick in classified assets and nonperformers? A: Timothy R. Bruckner, Chief Banking Officer of Regional Banking, noted that the majority is related to secured investor real estate loans. They aggressively manage the portfolio by pressing for remargining early in the rate increase cycle and adjust loan balances based on current appraised values.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
