Operational Execution And Strategic Risk-Taking Is Benefitting Washington Federal Meaningfully

Allocating capital and managing risk are critical duties for bank managers, and I think Washington Federal (NASDAQ:WAFD) ("WaFed") has been doing a better job of it than I'd expected when I last wrote about the company. While I liked WaFed and saw improvement, I didn't think there was quite enough undervaluation to merit a bullish stance. Since then, the shares are down slightly, but have outperformed smaller regional peers by about 5%.

WaFed still doesn't look like a remarkably cheap bank, and there are some risks to the outlook (including management's own guidance for slowing loan growth). The company has made good progress on costs, though, and I can see a clearer path now toward a higher-quality, lower-cost deposit base to support a quality, growing loan portfolio. An economic slowdown over the next 12 to 18 months is certainly a risk (particularly in key states like Texas), but I do lean more positively on this under-followed company.

 

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Operational Execution And Strategic Risk-Taking Is Benefitting Washington Federal Meaningfully