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By Steve Gelsi

Analyst praises Western Alliance's diversified loan portfolio with a 'strong earnings engine'

Western Alliance Bancorp drew praise Thursday for its discounted price and "strong earnings engine" as financial advisor Hovde Group initiated coverage of the beaten-down bank stock with an outperform rating.

Western Alliance Bancorp stock (WAL) drew a price target of $65 a share. The stock closed at $31.91 a share on Wednesday in an ugly day for bank stocks, which have been hard-hit in the wake of the Silicon Valley Bank's demise earlier this month.

Hovde Group analyst Ben Gerlinger said the bank offers a strong business at a good price.

"While the market continues to digest the recent banking turmoil, we find WAL's liquidity stance more than ample to cover any presumed 'deposit flight'," Gerlinger said. "Even with our late-stage economic outlook, concerns around commercial real estate, and the assumption of a more pronounced deposit beta in 1Q, we find the core earnings too robust to pass up at today's prices."

As the Phoenix-based bank continues to capture market share and grow deposits, the results will likely quell investor concerns, he said.

"We believe first-quarter results are likely to reinforce the strong balance sheet positioning and prove limited deposit flight," Gerlinger said.

The comment on Western Alliance Bancorp came after the company on Friday said deposit outflows after Silicon Valley Bank was taken over by the FDIC had fallen sharply and that it was seeing "significant inflows and new account openings."

It also disclosed that 55% of its deposits are insured by Federal Deposit Insurance Corp., with $20 billion of available liquidity.

MarketWatch Deep Dive columnist Philip van Doorn listed Western Alliance in a ranking of ban stocks by upside potential implied by consensus price targets.

See:24 bank stocks that contrarian bottom-feeders can feast on now

-Steve Gelsi

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March 23, 2023 07:52 ET (11:52 GMT)

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