Western Alliance Eyes Private Credit With Key Milestone in Sight

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(Bloomberg) — Western Alliance Bancorp, having recovered from hits it took during the regional banking crisis two years ago, now plans to expand its relationships with private credit firms as its asset level approaches a key regulatory threshold.

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“Complacency is devastating,” Chief Executive Officer Ken Vecchione said in an interview. “Rather than watch private credit encroach on our market share, we reached out to private credit firms and found a path where we both could coexist.”

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The Phoenix-based company has been in talks over the past six months to form partnerships with private credit firms, Vecchione said. The goal is to provide loans to those firms so they can finance loans that the bank would have deemed too risky to underwrite on its own. 

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Private credit has loomed over traditional banks by threatening to siphon away large pieces of their financing businesses, including corporate loans. Many banks have been fighting back by forming partnerships like the ones Western Alliance is planning, as well as by plowing their own funds into private credit, a strategy that could leave them competing with their own traditional lending desks.

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Western Alliance’s planned partnerships are expected to be a significant contributor to the bank’s target of increasing loans by 9.3% this year, Vecchione said.

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A new marketing campaign planned for the end of next quarter is part of the push, as the company retires six brands that are legacies of its history as a consolidator of community banks, including Alliance Bank of Arizona and Bank of Nevada. One it will keep is AmeriHome Mortgage, which originates loans in 47 states.

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The consolidated brand makes it easier for bankers from the financing and corporate trust divisions to approach potential private credit partners without creating confusion about who’s calling, Vecchione said.

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$100 Billion

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With $83 billion in assets, Western Alliance expects to cross the $100 billion mark in early 2027, reaching a key regulatory milestone that comes with the benefit of larger scale, but also adds stricter regulatory oversight and more compliance requirements.

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To meet those higher bars, the bank expects to spend $30 million to $35 million both this year and next, according to Chief Administration Officer Tim Boothe, who’s leading the effort.

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While banks often turn to mergers and acquisitions to leap across a critical asset threshold, Western Alliance is attempting to do it through organic growth.

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“We stand ready to take advantage of any disruptions that may happen in the industry, and our advantage is that we don’t have to do M&A to grow,” Vecchione said.

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That kind of optimism was tough to muster two years ago, when Silicon Valley Bank’s failure sparked fears that instability would spread to other regional banks. Western Alliance lost billions of deposits in the first few days of the crisis, and the subsequent failure of First Republic Bank helped wipe out nearly 80% of its market capitalization.