KBRA Affirms Ratings for Western Alliance Bancorporation

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, the preferred stock rating of BBB-, and the short-term debt rating of K2 for Western Alliance Bancorporation (NYSE: WAL; or "the company"), as well as the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for Western Alliance Bank ("the bank"). KBRA also affirms the BBB+ Issuer rating for Western Alliance Trust Company, N.A. ("WATC"), a wholly-owned subsidiary of WAL, as well as the A- Issuer rating for AmeriHome Mortgage Company, LLC ("AmeriHome"), which remains a subsidiary of the bank. Additionally, the BBB preferred stock rating for BW Real Estate, Inc., a majority-owned REIT subsidiary of the bank, was also affirmed. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

WAL’s favorable operating performance (including a core ROA of ~1% in recent periods), as well as balance sheet trends – principally solid core deposit flows and internal core capital generation – since the industry’s funding challenges that were magnified in March 2023, have done well to support ratings. With respect to deposit flows, WAL’s $66 billion of total deposits at YE24 were up $11 billion from the prior year; ~3x the $3.4 billion year-over-year increase in loans HFI. While the brokered deposit channel, together with increased use of reciprocals, has contributed to WAL’s strong flows, so too have meaningful core balances from new and existing commercial customers. Beyond the considerably larger, and what we consider to be more durable deposit base that incorporates substantially lower uninsured / uncollateralized balances, WAL’s enhanced earning asset liquidity positions the company very well from this vantage point. Furthermore, additional strategic deposit initiatives continued to benefit WAL’s core funding profile, following the deposit mix changes to higher cost balances that had been evident for the company (and industry) principally prior to mid-2024. Regarding a refined strategic earning asset focus, beyond the noted enhanced liquidity elements, WAL has effectively reduced select loan exposures determined to be more transactional in nature, including some contraction in the scale C&D book, which has been the driver of somewhat lower relative total ICRE exposure. While not necessarily unique strategic or financial profile adjustments, we consider it fundamentally important that WAL continues to benefit from a very experienced management team that has demonstrated long-term success executing its business model, with diverse commercial verticals that supplement core middle-market banking; having produced favorable risk-adjusted returns over time. Similarly significant to WAL’s enhanced creditor profile has been the meaningful growth in the company’s core capital measures. Through a combination of solid internal capital generation and RWA optimization, as well as disciplined growth, WAL’s CET1 measure continues to track above 11% in recent periods and is expected to remain at similar levels.

Rating Sensitivities

Positive rating momentum could emerge from continued demonstration of solid core earnings power, positive client core deposit trends, and better-than-peer prospective credit loss performance. Any meaningful slippage in core funding profile, combined with evidence of reduced core earnings (and therefore inability to attain capital plan) could pressure ratings.

To access ratings and relevant documents, click here.

Methodologies