Moody’s slices Western Alliance to junk

Moody’s Investors Service said it downgraded its ratings for Western Alliance Bancorporation and its bank subsidiary, Western Alliance Bank, together Western Alliance, including the local-currency long-term issuer rating to Ba1 from Baa2 with a stable outlook from ratings under review. Moody’s started the review for downgrade on March 13.

The agency also cut the local-currency non-cumulative preferred stock rating to Ba3 (hyb) from Ba1 (hyb), its local-currency senior unsecured shelf rating to (P)Ba1 from (P)Baa2, its local-currency subordinate shelf rating (P)Ba1 from (P)Baa2, its local-currency preferred shelf rating to (P)Ba2 from (P)Baa3 and its local-currency non-cumulative preferred shelf rating to (P)Ba3 from (P)Ba1.

“At year-end 2022, Western Alliance's uninsured deposits were 58% of total deposits and a subset of its deposits were sourced from the technology/innovation sector and/or from non-core regions, which resulted in an 11% decline in Western Alliance's deposits from year-end 2022 to March 31, 2023 and drove its increased reliance on market funds. Although Western Alliance has substantially increased its insured deposit levels and recently disclosed that at April 14, 2023 only 27% of its total deposits were uninsured, the consequences of its high reliance on confidence-sensitive deposit funding heading into the current strained environment led to the rating downgrade,” Moody’s said in a press release.

The agency noted Western Alliance is acting to shore up its balance sheet through the sale of securities and loans and mortgage servicing rights.

“The stable outlook for Western Alliance reflects Moody's view that the bank has a high likelihood of executing its asset disposition plan as envisioned, which will in time reduce its use of market funding and strengthen its capital,” the agency said.

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