Moody’s eyes Western Alliance for trim

Moody’s Investors Service said it placed all its ratings and assessments for Western Alliance Bancorporation and its subsidiary Western Alliance Bank on review for downgrade. The outlook before the review was negative.

The ratings under review include Western Alliance Bancorporation's Baa2 local-currency issuer rating, its Baa2 subordinated local-currency debt rating, its Ba1 (hyb) local-currency preferred stock non-cumulative rating, its (P)Baa2 local-currency senior unsecured shelf rating, its (P)Baa2 local-currency subordinate shelf rating, its (P)Baa3 local-currency preferred shelf rating and its (P)Ba1 local-currency preferred shelf non-cumulative rating.

In a press release, the agency noted Western Alliance's heavy reliance on more confidence-sensitive uninsured deposit funding, material unrealized losses in its available-for-sale (AFS) and held-to-maturity (HTM) securities portfolios, and a relatively low, though improving, level of capitalization. “Although Western Alliance's proportion of market funding over total assets is modest, the share of its deposits which are above the Federal Deposit Insurance Corporation (FDIC)'s insurance threshold is significant.”

To offset its funding weaknesses, Western Alliance said it boosted cash reserves to more than $25 billion, which Moody’s said it will consider during the review.

“An additional offset to Western Alliance's funding risks is the creation of the Federal Reserve’s and the Treasury Department's new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks and other eligible depository institutions pledging qualifying assets owned prior to the facility's announcement date,” the agency said.

Moody’s said its review will consider the bank's variations in deposits since January, which have risen significantly based on management’s mid-quarter update, as well as the stickiness of its deposits going forward.

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