JPMorgan has adjusted its view of Western Alliance Bancorporation, reducing the bank's equity rating from Overweight to Neutral even as it raised its price target to $105 from $100. The investment bank’s reassessment reflects a tension between projected earnings strength and increasing uncertainty around deposit-related expenses.
JPMorgan continues to project Western Alliance will be among the stronger producers of EPS and tangible book value (TBV) growth in 2026. However, the analyst team emphasized that upside risk to the company’s Earnings Credit Rate - or ECR - deposit costs is the primary driver of the downgrade.
The bank noted that management issued three successive upward revisions to its ECR deposit cost guidance over the course of 2025 following the initial outlook. By contrast, JPMorgan observed only modest improvements in the core net interest income growth outlook during the same timeframe, a dynamic that has heightened sensitivity to rising deposit expense assumptions.
For 2026, Western Alliance provided a new outlook for ECR deposit costs in a range of $535 million to $585 million. That span sits above prior consensus estimates of roughly $500 million, and JPMorgan signaled a bias toward the upper end of the company’s provided range.
In outlining its concerns, the investment bank also pointed to several related considerations: an expectation of limited relief from falling interest rates if only two rate cuts occur this year; the probability that ECR-linked deposits will remain roughly one-third of total deposits; and continued expansion of ECR-associated deposits driven by ongoing investments in growth.
Those dynamics underpin JPMorgan’s view that upside risk to deposit costs could meaningfully affect profitability, even as the company displays favorable earnings and TBV growth metrics for the next year.
Recent financial results
Separate from the rating change, Western Alliance reported robust fourth-quarter 2025 results that outpaced analyst projections. The bank posted earnings per share of $2.59, above the $2.39 consensus estimate, representing an 8.37% surprise. Revenue for the quarter reached $980.9 million, topping the anticipated $913.4 million and marking a 7.39% surprise. These results underscore the company’s recent operational strength and its ability to exceed market forecasts in the period cited.
Investors and market participants evaluating Western Alliance will weigh the firm’s solid recent earnings performance against JPMorgan’s caution about escalating ECR deposit costs and the potential for constrained relief from rate cuts.