The Fed raised interest rates at the fastest pace in decades to tame decades-high inflation. While higher cost of borrowing roiled several asset classes and curtailed dealmaking, it helped lenders charge higher interest from borrowers.
Net interest income for Western Alliance rose 36% from a year earlier to $609.9 million in the quarter ended March 31, following the footsteps of U.S. banking heavyweights who also reaped windfalls from higher interest payments in the first three months of the year. Still, the lender reported a 5% decline in net interest income from the previous quarter due to an increase in average balances of short-term borrowings and interest bearing deposits. Regional lenders such as Western Alliance came under pressure after the closure of two smaller lenders triggered worries about deposit flight and funding costs.
Deposits fell nearly 9% from a year earlier and 11% from the previous quarter to $47.6 billion as of March 31. Last month, the Phoenix-based bank warned of a moderate decline, but affirmed its full-year deposit growth forecast of 13% to 17%. "While we experienced elevated net deposit outflows immediately following the closure of other banks, deposit balances quickly stabilized," the company said in a statement, adding insured deposits make up nearly 73% of the total and rests well above industry norms compared with the 50 largest U.S. banks. A worsening economy also prompted the lender to stockpile $19 million in provisions this quarter compared with $9 million a year ago.
Shares of Western Alliance shot up 16% in extended trading
to $37.97 after it closed 0.9% lower on Tuesday. The lender
reported an adjusted profit of $2.30 per share in the quarter,
comfortably above analysts' average estimate of $2.04, according
to Refinitiv data.
(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Krishna
Chandra Eluri)
