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Washington Federal's (WAFD) Q4 Earnings Beat, Revenues Miss
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Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2020 (ended Sep 30) earnings came in at 45 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year plunge of 31.8%.
Results reflect higher expense, lower interest rates, provision losses and a fall in other income. However, rise in loan and deposit balances provided support.
Net income for the fiscal fourth quarter slipped 34.4% year over year to $34.3 million.
For fiscal 2020, earnings of $2.26 per share were down 13.4% year over year. The reported figure, however, outpaced the Zacks Consensus Estimate of $1.97. Net income fell 17.5% to $173.4 million.
Revenues Decrease, Costs Flare Up
Net revenues for the reported quarter came in at $125.9 million, down 7.9% from the year-ago quarter. The top-line figure also missed the Zacks Consensus Estimate of $135.6 million.
For fiscal 2020, net revenues came in at $556.5 million, up 2.4%. Also, the top line surpassed the consensus estimate of $532.4 million.
Net interest income was $114.8 million in the fiscal fourth quarter, down 4.4% from the year-earlier period. Moreover, net interest margin shrunk 45 basis points (bps) to 2.67%.
Total other income of $11.1 million plummeted 32.7% from the prior-year quarter. This mainly resulted from the decrease in other income and deposit fee income.
Operating expenses flared up 7.8% year on year to $78.2 million. Higher compensation and benefit, FDIC insurance premiums, information technology and other expenses led to this upswing.
The company’s efficiency ratio was 62.09%, up from the 53.08% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the fiscal fourth quarter, return on average common equity was 6.83%, down from the 10.32% witnessed at the end of the year-ago quarter. Return on average assets was 0.74%, down from 1.26% at the end of the year-ago quarter.
Loans & Deposits Rise
As of Sep 30, 2020, net loans receivables amounted to $12.8 billion, up from the $11.9 billion recorded on Sep 30, 2019. Also, customer deposit accounts were $13.8 billion, up from $12 billion recorded on Sep 30, 2019.
Credit Quality Deteriorates
As of Sep 30, 2020, the ratio of non-performing assets to total assets was 0.20%, down 7 bps year over year. Furthermore, the allowance for loan losses and reserve for unfunded commitments was 1.33% of gross loans outstanding, up from the 1.04% recorded on Sep 30, 2019.
Additionally, the provision for credit losses during the fiscal fourth quarter was $6.5 billion, as against the $1.9 billion release recorded in the prior year.
Share Repurchase Update
During fiscal 2020, Washington Federal repurchased 3.3 million shares at an average price of $33.58 per share.
Our View
Washington Federal is well poised to grow organically on a continued rise in loan balances. Nonetheless, persistently rising expenses, low interest-rate environment and the uncertainties due to the pandemic are likely to impede the company’s bottom-line growth. Further, deteriorating credit quality remains a headwind.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Associated Banc-Corp (ASB - Free Report) is set to release third-quarter 2020 results on Oct 22, while Prosperity Bancshares, Inc. (PB - Free Report) and BankUnited, Inc. (BKU - Free Report) are scheduled to report on Oct 28.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Washington Federal's (WAFD) Q4 Earnings Beat, Revenues Miss
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2020 (ended Sep 30) earnings came in at 45 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year plunge of 31.8%.
Results reflect higher expense, lower interest rates, provision losses and a fall in other income. However, rise in loan and deposit balances provided support.
Net income for the fiscal fourth quarter slipped 34.4% year over year to $34.3 million.
For fiscal 2020, earnings of $2.26 per share were down 13.4% year over year. The reported figure, however, outpaced the Zacks Consensus Estimate of $1.97. Net income fell 17.5% to $173.4 million.
Revenues Decrease, Costs Flare Up
Net revenues for the reported quarter came in at $125.9 million, down 7.9% from the year-ago quarter. The top-line figure also missed the Zacks Consensus Estimate of $135.6 million.
For fiscal 2020, net revenues came in at $556.5 million, up 2.4%. Also, the top line surpassed the consensus estimate of $532.4 million.
Net interest income was $114.8 million in the fiscal fourth quarter, down 4.4% from the year-earlier period. Moreover, net interest margin shrunk 45 basis points (bps) to 2.67%.
Total other income of $11.1 million plummeted 32.7% from the prior-year quarter. This mainly resulted from the decrease in other income and deposit fee income.
Operating expenses flared up 7.8% year on year to $78.2 million. Higher compensation and benefit, FDIC insurance premiums, information technology and other expenses led to this upswing.
The company’s efficiency ratio was 62.09%, up from the 53.08% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the fiscal fourth quarter, return on average common equity was 6.83%, down from the 10.32% witnessed at the end of the year-ago quarter. Return on average assets was 0.74%, down from 1.26% at the end of the year-ago quarter.
Loans & Deposits Rise
As of Sep 30, 2020, net loans receivables amounted to $12.8 billion, up from the $11.9 billion recorded on Sep 30, 2019. Also, customer deposit accounts were $13.8 billion, up from $12 billion recorded on Sep 30, 2019.
Credit Quality Deteriorates
As of Sep 30, 2020, the ratio of non-performing assets to total assets was 0.20%, down 7 bps year over year. Furthermore, the allowance for loan losses and reserve for unfunded commitments was 1.33% of gross loans outstanding, up from the 1.04% recorded on Sep 30, 2019.
Additionally, the provision for credit losses during the fiscal fourth quarter was $6.5 billion, as against the $1.9 billion release recorded in the prior year.
Share Repurchase Update
During fiscal 2020, Washington Federal repurchased 3.3 million shares at an average price of $33.58 per share.
Our View
Washington Federal is well poised to grow organically on a continued rise in loan balances. Nonetheless, persistently rising expenses, low interest-rate environment and the uncertainties due to the pandemic are likely to impede the company’s bottom-line growth. Further, deteriorating credit quality remains a headwind.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Washington Federal, Inc. price-consensus-eps-surprise-chart | Washington Federal, Inc. Quote
Currently, Washington Federal carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Schedules of Other Banks
Associated Banc-Corp (ASB - Free Report) is set to release third-quarter 2020 results on Oct 22, while Prosperity Bancshares, Inc. (PB - Free Report) and BankUnited, Inc. (BKU - Free Report) are scheduled to report on Oct 28.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>