Writing about Seattle’s Washington Federal (WAFD) back in October of 2020, I wasn’t all that impressed with what I found. I was concerned about the bank’s deposit franchise, as well as its ability to compete head to head with larger banks to grab a larger share of commercial lending in its more attractive markets. There were also issues like expense efficiency to consider, with an ongoing consent order related to Bank Secrecy Act / Anti-Money Laundering (BSA / AML) shortfalls impacting results.
Since then, the shares have outperformed the S&P 500 handily, but have underperformed its smaller-bank peer group by more than 30%, so I don’t really regret my call that there were many other more compelling ideas out there.
Since then, the bank has made some improvements, including a noticeable improvement to the deposit mix and some interesting shifts in the loan book. I’m more bullish on the growth outlook now, but it’s a stretch for me to get to a near-term fair value much above the high-$30’s, making this more of an “improving hold” to me than a clear buy now.
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With Rates Set To Rise, Washington Federal Looks To Leverage Better Growth
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