The banking sector is showing some signs on stability this week in the wake of last month's crisis that saw the collapse of three regional lenders in the matter of days.
Notably, the SPDR S&P Bank ETF (NYSE: KBE) posted its best day since March 21 on Wednesday following the positive first-quarter earnings report from Western Alliance Bancorp (NYSE: WAL).
Western Alliance climbed over 24% on Wednesday after the back said its deposit outflows during the quarter -- which where primary seen from technology and innovation customers following the rapid closures of Silicon Valley Bank and Signature Bank -- stabilized by late March and grew by $2 billion in the first two weeks of April. By the quarter's end, deposits totaled $47.6 billion, down only 11% from $53.6 billion at the end of 2022.
The stock also received an upgrade from Wedbush on Wednesday to Outperform from Neutral and earned a stop on the firm's best ideas list after its earnings showed that the lender is performing well a month after the banking crisis.
"Deposit outflows in March have partially reversed and WAL's higher level of insured deposits at 73% should help support deposit levels going forward," analysts led by David Chiaverini wrote in a note on Wednesday, quoted by Bloomberg. Chiaverini added that the buy-equivalent rating is based on bets that the high level of insured deposits will help the lender "successfully navigate through this turbulent time."
Wedbush also cited Western Alliance's valuation as compelling, as shares were down more than 45% year-to-date as the stock was one of the hardest hit by March's financial sector sell-off.
In addition to Western Alliance, Wedbush has added Regions Financial (NYSE: RF), M&T Bank (NYSE: MTB) and New York Community Bancorp (NYSE: NYCB) to the list.
Beyond single-stock performance, KBE has seen $1.2 billion in in-flows in March according to a Morningstar monthly report, as many market participants bet that the battered industry will rebound after the crisis settles.
"Investors ran toward the banking crisis rather than away from it," analysts Adam Sabban and Ryan Jackson wrote in the report. "Plummeting regional bank stock prices attracted a fresh batch of buy-the-dip investors."