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Is Western Alliance (WAL) Stock on the Brink of an FDIC Death?


  • Western Alliance Bancorp (WAL) may be the next bank to fold under regulatory pressure.
  • The regional bank is watching shares plunge as investor confidence in the sector decreases.
  • With First Republic gone, WAL stock is marked as a likely candidate for an FDIC death.
WAL stock - Is Western Alliance (WAL) Stock on the Brink of an FDIC Death?

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Another financial institution may be on the verge of collapse. Western Alliance Bancorp (NYSE:WAL) has been sliding for weeks as the banking crisis has progressed. In just a few hours of trading, it has shed more than 50% of its value, casting a dark shadow over its future. This type of performance leads to the question of whether WAL stock is on the path to Federal Deposit Insurance Corporation (FDIC) receivership. Investors recently watched the same fate befall Western Alliance peer First Republic Bank, which delisted earlier this week after reports of the government agency closing in. The FDIC often functions as the grim reaper for banks that don’t have a path forward. It seems Western Alliance may be the next casualty of the banking crisis.

How likely is it that this regional bank will be the next to fold under pressure from the encroaching FDIC? Let’s take a closer look at what investors should be expecting.

What’s Happening With WAL Stock

When a company falls by as much as Western Alliance has today, it’s difficult not to be concerned. As of this writing, WAL stock is down more than 35% for the day. It shows no signs of a major recovery in the works but did see a big bounce up on the price chart after denying rumors of a sale. Still, since markets opened for intraday trading about three hours ago, being down over 30% isn’t very encouraging. But it is hardly unexpected when a company appears to be on the verge of collapse.

Fellow regional bank PacWest Bancorp (NASDAQ:PACW), also a likely candidate for an FDIC death, has done even worse today, falling 56% at one point.

In the wake of the Silicon Valley Bank collapse that started the crisis, InvestorPlace named three banks that were likely to be the next to collapse. The three companies in question were First Republic, Western Alliance and PacWest. Of that group, one has already folded, and it is looking increasingly likely that the other two will soon follow. However, momentum from the First Republic collapse isn’t the only thing pushing the sector down right now. The Federal Reserve recently voted to hike interest rates again, leading to further pressure on regional banks. As Barron’s reports:

“Shares of other regional lenders were also lower Thursday. On top of concerns about PacWest, banks reacted to the news that the Federal Reserve hiked interest rates for a tenth time this cycle on Wednesday. Higher interest rates put pressure on banks by raising the costs of borrowing, potentially pressuring customers and limiting the amount of people applying to take out loans.”

At a time when dark clouds of uncertainty are hanging the regional banking market, bad news from the Fed is the last thing its companies need. Investor confidence has been falling faster than banking stocks, but now the pressure on companies such as Western Alliance and PacWest is accelerating for multiple reasons. InvestorPlace contributor Josh Enomoto recently reported that the clock is ticking for PACW stock. If that is true, as it seems, time is also running out for WAL stock.

The End of the Line?

As noted, the future is still uncertain for these regional banks. But if there’s one thing Wall Street hates, it is uncertainty. Since First Republic was delisted recently, WAL stock and PACW will be on the high watch. The FDIC will likely see fit to step in and take control of either or both companies. When that happens, it will probably be the end of the line, sending remaining regional banking stocks down even further.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2023/05/is-western-alliance-wal-stock-on-the-brink-of-an-fdic-death/.

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