Western Alliance rises 2.27% after Q3 profit tops estimates

Western Alliance Bank said in an earnings-call transcript published Oct. 20 that third-quarter adjusted EPS rose 7.5% to $2.45, above the $2.43 analyst estimate.

The beat was narrow, but revenue of $1.01 billion exceeded the $988.23 million forecast as the lender trimmed funding costs and lifted fee-income guidance for 2026.

The stock rose 2.27% to $75.30 from a $73.63 close, according to the article. Net income rose 6% from a year earlier to $277 million, and total deposits were $81.8 billion, essentially flat from the prior quarter.

Chief Executive Ken Vecchione said the bank advanced its funding strategy. “We exceeded our original deposit optimization goal by $1.5 billion, with $4.5 billion of deposits remixed over the prior two quarters, one quarter earlier than expected,” he said.

Chief Financial Officer Vishal Idnani called the quarter “another quarter of strong and steady financial performance with continued earnings growth, improving credit trends, and strong reserve coverage alongside increased capital returns.”

Net interest income, the spread-driven revenue banks earn from lending and securities after funding costs, rose 8% from a year earlier to $808 million. Non-interest income increased 10% to $207 million, helped by commercial banking fees and other income streams, the article said.

Pre-provision net revenue, a bank profit measure before setting aside money for loan losses, rose 6% year over year to $419 million. Return on average tangible common equity was 15.5%, up 20 basis points from the second quarter, while tangible book value per share rose 6% from a year earlier to $62.22.

Management cut full-year deposit growth guidance to $3.5 billion to $4 billion from $6 billion, citing a decision to move higher-cost balances off the balance sheet. Loan growth guidance was reduced by $1 billion.

The bank also lowered its 2026 net interest income growth outlook to 11% to 12% from 12% to 14%. It raised full-year non-interest income growth guidance to 18% to 21% from 13% to 17%, and reduced deposit cost guidance to $650 million to $675 million from $675 million to $700 million.

Credit metrics improved in the quarter. Non-accrual loans, loans no longer generating scheduled interest, fell 14% from the prior quarter to $485 million. Vecchione said, “We are not seeing any bubbles in the book,” according to the transcript.

The quarter still leaves several pressure points. Management said fourth-quarter mortgage banking revenue should be about $70 million, below recent levels because of seasonal softness and higher mortgage rates. Net interest margin, the lending spread earned on assets, is expected to face a 3 to 4 basis point seasonal headwind, with a basis point equal to one-hundredth of a percentage point.

Analysts on the call focused on deposit optimization, credit quality, expenses and buybacks. Management said it remains committed to repurchases but will balance them against regulatory changes, credit rating goals and a target common equity tier 1 ratio of about 11%, a core regulatory capital measure.

Source: earnings-call transcript, Investing UK, Oct. 20.