Western Alliance lands atop cheaply valued bank stocks list as of mid-September

Phoenix-based Western Alliance Bancorp. kept its position as the least expensive US bank stock by price-to-estimated 2024 earnings per share as of mid-September, leading other regional banks on the list.

S&P Global Market Intelligence analyzed the price-to-estimated earnings multiples for US banks. To be included in this analysis, a company needs to have at least four analyst normalized EPS estimates available for calendar year 2024. In addition, the bottom 20% of banks by price to tangible book were excluded.

Cheaply valued bank stocks

As of Sept. 15, Western Alliance recorded a price-to-estimated EPS multiple of 5.9x, the lowest among the 127 banks included in this S&P Global Market Intelligence analysis. The industry median for the institutions analyzed was 9.0x.

The estimated 2024 normalized EPS for Western Alliance represents a 3.1% increase from the estimated 2023 normalized EPS for the company. The institution's year-to-date total return as of Sept. 15 was negative 16.3%.

Western Alliance was one of the banks that faced stock price pressure and large deposit outflows after the bank failures in March. Constant communication with the investment community, better-than-feared quarterly results, and nondisclosure agreements with top depositors helped the company survive being caught in the crosshairs of those failures.

In late August, Piper Sandler analyst Matthew Clark assumed coverage of Western Alliance at "overweight" with a price target of $60 and 2023 and 2024 EPS estimates of $7.05 and $8, respectively.

The rating was partly based on Western Alliance "being among the industry's most heavily discounted bank stocks for a top performing institution with industry leading returns, relative market strength, and a sophisticated management team," the analyst wrote in a note.

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Dallas-based Comerica Inc., the largest bank sitting below the $100 billion threshold, was among the cheaply valued stocks as of the middle of the month with a price-to-estimated EPS multiple of 7.1x. The company is gearing up for higher expenses as it approaches $100 billion in assets and grapples with a tough macroeconomic environment.

Little Rock, Ark.-based Bank OZK and Tacoma, Wash.-based Columbia Banking System Inc. ranked second and third, respectively, on the least-expensive stocks list, each with a multiple of 6.7x. Other regionals on the list include Pasadena, Calif.-based East West Bancorp Inc. and Stamford, Conn.-based Webster Financial Corp. with a multiple of 6.9x each.

Richly valued bank stocks

Texas-based banks topped the most expensive bank stocks ranking as of mid-September.

Dallas-based Triumph Financial Inc. ranked first with a price-to-estimated EPS multiple of 29.4x, followed by Dallas-based Hilltop Holdings Inc. with 21.1x and Abilene, Texas-based First Financial Bankshares Inc. with 19.0x.

Negative returns

In the last 12 months, the top three least expensive bank stocks posted negative returns while two of the top three most expensive stocks booked positive returns. Comparatively, the S&P 500 returned positive 16.0% and the S&P US BMI Banks index returned negative 9.3%.

Western Alliance, the least expensive stock, had a negative 31.5% return, while the most expensive stock, Triumph Financial, had a positive 10.1% return.

In terms of year-to-date returns, Raleigh, NC-based First Citizens BancShares Inc.'s positive 74.2% return was the highest among all the banks included in the analysis. Memphis, Tenn.-based First Horizon Corp.'s negative 51.6% return was the lowest.