UPDATE: UBS Downgrades Western Alliance Bancorporation (WAL) to Neutral
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UBS analyst Brock Vandervliet downgraded Western Alliance Bancorporation (NYSE: WAL) from Buy to Neutral with a price target of $31.00 (from $38.50).
The analyst comments "We are downgrading WAL to Neutral from Buy based on mounting credit concerns and slower 2H balance sheet growth. We reduce our EPS forecasts to $3.18/$4.26 from $4.09/$4.78. Credit concern is tied primarily to three areas comprising 20% of loans including hotel, casino and technology lending. WAL has a larger than average 9% hotel lending exposure ($1.9Bn) and recently disclosed casino exposure ($500mn). The hotel segment experienced early and severe damage from COVID-19 with RevPAR declines over 80% yr/yr. and occupancy under 20% in April. These factors are not fully reflected in the reserve, which may cause greater than expected credit deterioration. Technology lending drove a $30mn increase in Q1 NPLs. Due to COVID-19, more early and mid-stage business models may be at risk, which could sharply increase loss experience. Finally, as the economic and credit outlook deteriorates, WAL’s high teens balance sheet growth rate should slow to low double digits over time (PPP lending will likely be a short-term boost)."
Shares of Western Alliance Bancorporation closed at $30.89 yesterday.
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