Firm predicts strengths, potential further losses for Western Alliance Bancorporation
A brokerage firm specializing in bank stocks on Tuesday rated Western Alliance Bancorporation, the Las Vegas-based holding company for Bank of Nevada, “market perform,” reflecting strengths but also potential further losses.
The rating means that FIG Partners expects Western Alliance shares will perform about the same as a bank index over the next 12 months.
“We anticipate elevated (loan) losses could continue but that the company has experienced the worst in securities losses and some gains are expected,” analyst Timothy Coffey said in the report, which is FIG Partners’ first for Western Alliance.
The firm estimated a loss per share of 20 cents in the third quarter and 19 cents in the fourth quarter. Western Alliance is projected to post a loss of 8 cents per share next year before turning positive at 42 cents for 2011.
The company operates five banks in Nevada, Arizona and California. It is the largest independent bank based in Nevada with $5.7 billion in assets.
Western Alliance is interested only in acquisitions of banks that have been seized by regulators, rather than traditional buyouts, the report said. The company is more interested in acquiring assets in Southern California, rather than in Nevada and Arizona.
The report said the sale of Western Alliance “is not a question of if, but of when.” It mentions that Chairman and Chief Executive Robert Sarver has a history of establishing banks and selling them at a premium.
Among the potential acquirers are JP Morgan Chase, Citigroup, Comerica and City National Corp.
With the dollar weak, foreign banks, such as BNP Paribas Group, which owns Bank of the West, and Banco Bilboa Vizcaya Argentaria, which has banks in Texas, have an advantage over domestic acquirers.
The firm said that Western Alliance may continue losing money on commercial real estate loans and on commercial and industrial loans.
The holding company, however, has a “very strong deposit franchise” which stems from the company’s emphasis on relationship-based business banking, rather than transaction-based development loans.
FIG Partners estimated that Western Alliance will set aside an allowance for loan losses totaling $99.6 million this year including 58 percent that has been realized. The securities firm projected that the banking company will charge off $66.2 million in loans this year with 73 percent of that already reflected on bank books.
Risks include the possibility of more severe than expected economic slumps in Las Vegas, Phoenix and San Diego.
FIG Partners set a target price of $6 for Western Alliance shares. The stock closed on the New York Stock Exchange on Tuesday at $5.75, off 4 cents or 0.7 percent.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
