TLDR
- Western Alliance stock dropped 10.8% to $70 on October 16 after revealing a fraud lawsuit over a $100 million loan
- Zion Bancorp disclosed a $50 million fraud-related charge-off, triggering a 6% decline in regional banking stocks
- Analysts maintain bullish stance with 13 of 14 rating Western Alliance a buy, consensus price target at $103 (30% upside)
- RBC Capital Markets calls the sell-off overdone, citing strong fundamentals across regional banks
- Western Alliance reports Q3 2025 earnings October 21 with expected EPS of $2.11 on $891 million revenue
Western Alliance Bancorp shares traded near $70 on October 17 following an 10.8% plunge the previous day. The decline came after the bank disclosed a lawsuit alleging fraud by borrowers on a $100 million loan.
Western Alliance Bancorporation, WAL
The Phoenix-based lender filed legal action against Cantor Group V, LLC for allegedly forging real estate loan documents. Western Alliance has not taken a loss on the loan yet, but the news spooked investors already concerned about regional bank credit quality.
Zion Bancorp intensified sector worries by revealing a $50 million charge-off linked to suspected fraud. The combined announcements sent the KRE regional banking ETF down approximately 6% on October 16.
Stephen Biggar from Argus Research noted that poor credit at one bank can quickly drag down the entire group. Regional bank stocks fell across the board despite most lenders showing solid fundamentals.
Wall Street Remains Bullish on Western Alliance
Analysts have maintained positive ratings on Western Alliance despite recent volatility. JPMorgan’s Anthony Elian raised his price target to $105 with an Overweight rating in early October.
RBC Capital’s Jon Arfstrom boosted his target to $100 while keeping an Outperform rating. The consensus among 14 analysts places the price target around $103, suggesting roughly 30% upside from current levels.
Thirteen out of 14 analysts rate Western Alliance stock as a buy or equivalent. TD Cowen and National Bank set even higher targets between $115 and $118.
RBC Capital Markets stated the recent sell-off created opportunities to add quality bank stocks. The firm specifically named Western Alliance, Zion Bancorp, and First Horizon as banks with overdone declines.
Regional banks that reported third-quarter results showed sequential loan growth and positive margin trends. First Horizon, Synovus Financial, and Home Bancshares all demonstrated controlled expenses and healthy credit metrics.
Q3 Earnings Could Stabilize Stock Price
Western Alliance reports third-quarter earnings after market close on October 21. Analysts expect $2.11 per share earnings on approximately $891 million in revenue.
These figures would represent growth from Q2’s $1.91 per share on $718 million revenue. The bank has benefited from higher interest income and expanding loan portfolios.
Management will address the fraud lawsuit and First Brands Group bankruptcy exposure during the earnings call. Western Alliance previously stated its criticized loans actually decreased at the end of September compared to June.
The bank emphasized its capital position remains strong with healthy loan and deposit levels. The alleged fraud appears isolated to specific borrowers rather than indicating systemic problems.
Major banks posted strong Q3 results recently, with JPMorgan Chase, Bank of America, and Wells Fargo beating forecasts. These results initially lifted regional bank stocks before the fraud disclosures reversed gains.
Western Alliance pays a $0.38 quarterly dividend yielding roughly 2% annually. The bank has shown no indication of cutting the dividend due to recent events.
Mike Mayo from Wells Fargo noted that loose credit periods can produce more fraud instances. He said overall credit quality remains fine but recent issues require monitoring.
Western Alliance is approaching $100 billion in assets, which could ease regulatory requirements. The bank has expanded its tech and venture banking business while growing deposits after the 2023 regional banking crisis.
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