Phoenix's Western Alliance Bancorp stock sees 2nd big decline after report of sale that bank denies
Phoenix-based Western Alliance Bancorporation took the unusual move Thursday of categorically denying a media report that it is putting some or all of its business up for sale as investors have grown nervous about banks — such as the company’s subsidiary — that hold significant amounts of uninsured deposits.
The company statement, issued during Wall Street trading hours in response to a Financial Times article that cited anonymous sources to say Western Alliance was exploring a potential sale of assets, curbed but didn’t entirely reverse a sharp drop in the stock price.
Western Alliance stock on May 4 finished down $11.37 a share, closing at $18.20 for the day. The stock had dropped to as low as $11.35 during the trading session. The bank's stock first fell sharply in March after bank runs at other institutions that led to their sales.
A company spokesperson brushed off what she called “noise” in the stock market and asserted that short-term prices don’t always reflect underlying corporate value.
“Our fundamentals remain strong, and our story is one of continuing financial strength,” the spokeswoman told The Arizona Republic. “Western Alliance Bank continues to be strong, stable and sound.”
Rout continues for regional banks
Western Alliance stock had traded above $80 a share as recently as early February, shortly before a run on deposits led to the failure of two other regional banks, Silicon Valley Bank and Signature Bank. Most assets of another bank, First Republic, were acquired recently by J.P. Morgan Chase in a deal arranged by the Federal Deposit Insurance Corp.
Other regional banks, including Los Angeles-based PacWest Bancorp, which lost half of its stock-market value on Thursday, also have come under Wall Street selling pressure. Moody's Investors Service last month downgraded several banking companies, including Western Alliance.
The common theme is nervousness over uninsured deposits — those not directly backed by the FDIC. While the vast majority of households don’t keep anywhere near the FDIC insurance limit of $250,000 at a single bank, some business customers do, to meet payroll or other large-dollar transactions.
Western Alliance had the fourth-highest share of total deposits in Arizona, behind J.P. Morgan Chase, Wells Fargo and Bank of America, according to a mid-2022 FDIC market-share report for the state. That also makes it the most prominent banking corporation headquartered here.
Bank denies media article of possible sale
Western Alliance Bancorporation, headed for years by former Phoenix Suns managing partner Robert Sarver and headquartered in downtown Phoenix, rejected the Financial Times report of a possible sale of all or part of its business as “categorically false in all respects.”
The company operates nine Western Alliance branches in Arizona and counts about 1,300 employees in the state. It had nearly 3,400 employees spread across several states at the end of 2022.
“Western Alliance is not exploring a sale, nor has it hired an adviser to explore strategic options,” the company’s statement continued. “It is shameful and irresponsible that the Financial Times has allowed itself to be used as an instrument of short sellers and as a conduit for spreading false narratives about a financially sound and profitable bank.”
Western Alliance said it is “considering all of our legal options in response to today’s article.”
The Financial Times article reported that two unnamed people who were briefed on “internal discussions” told the publication that the bank was exploring a potential sale of all or part of its business.
Focus on interest rates, deposits
Much of the pressure on regional banks was stoked by rising interest rates engineered by the Federal Reserve.
Three banks have failed so far this year, in contrast to no failures in 2021 or 2022.
The Financial Times article cited Federal Reserve Chairman Jay Powell as trying to ease concerns about banks, saying conditions had improved since early March and that the system overall is sound.
Need to know: Should depositors get more FDIC protection? What to know about the debate on bank insurance limits
According to the Financial Times article, 74% of Western Alliance Bank’s deposits are insured by the FDIC, with deposits increasing by about $1 billion from $47.6 billion at the end of March. That’s higher than the 15% or so of insured deposits at Silicon Valley Bank at the time of its failure.
Sarver, who moved the company from Las Vegas to Phoenix in 2010, sold the Suns after an investigation found evidence of a hostile workplace environment for women and African Americans. He had transitioned from Western Alliance’s CEO in 2018 to an executive chairman position, which he relinquished last year.
Reach the writer at russ.wiles@arizonarepublic.com.
This article originally appeared on Arizona Republic: Western Alliance stock tumbles after report of sale bank calls false
