NEW YORK, March 19, 2025–(BUSINESS WIRE)–KBRA assigns a preferred stock rating of BBB to BW Real Estate, Inc. (BW Real Estate), a majority-owned REIT subsidiary of Western Alliance Bank (“the bank”), the principal operating subsidiary of Western Alliance Bancorporation (NYSE: WAL; “Western Alliance” or “the company”). Beyond the assigned rating, Western Alliance’s other ratings, collectively, are unaffected by this action.
Key Credit Considerations
BW Real Estate’s preferred stock rating is principally driven by the current long-term ratings of Western Alliance Bank – including long-term deposit and senior unsecured debt ratings of A- and a subordinated debt rating of BBB+, as well as the Conditional Exchange feature of the instrument, which would result in an automatic conversion into preferred stock of the bank upon certain events.
WAL’s favorable operating performance (FY24 core ROA of ~1%) 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 the company’s ratings. With respect to deposit flows, WAL’s $66 billion of total deposits at YE24 were up $11 billion from the prior year. Admittedly, while the brokered deposit channel, together with increased use of reciprocals, have no doubt 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. 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 attractive business model, with diverse commercial verticals that supplement core middle-market banking; one which has 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, WAL’s CET1 measure has increased to 11.3% as of YE24.