Washington Federal Sees Strong Positive Leverage, But The Cost Of Doing Business Is Rising

Washington Federal (NASDAQ:WAFD) (“WaFed”) has done well since my last update, rising almost 7% (and beating regional banks by around 12%), with the stock getting a big boost on strong fiscal fourth quarter results, including excellent operating leverage and credit quality. The bank likewise posted healthy loan growth and decent deposit performance at a time when these metrics are getting closer scrutiny by the Street.

I still like WaFed, but operating conditions are going to get more challenging from here. The bank is going to have to rely more heavily on more expensive sources of funding for its loan growth, and that’s going to impact profitability. At the same time, I don’t see how credit can get much better for the bank. On the flip side, there are still opportunities to drive attractive loan growth in markets like Texas, Arizona, Nevada, and Utah, and I believe the shares do still offer some upside from here.

 

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 Washington Federal Sees Strong Positive Leverage, But The Cost Of Doing Business Is Rising