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Hancock Whitney (HWC) Up 0.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hancock Whitney due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hancock Whitney Q3 Earnings & Revenues Beat, Costs Down
Hancock Whitney’s third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Results gained from higher non-interest income, fall in operating expenses, and provision benefit. However, a decline in net interest income, which reflected lower interest rates and a fall in loan balance, was the undermining factor.
Results excluded the impact of non-operating items. Including these, net income came in at $129.6 million, up from $79.3 million in the prior-year quarter.
Revenues Improve, Expenses Inch Down
Total revenues were $328.1 million, up 2.9% year over year. The top line beat the Zacks Consensus Estimate of $324 million.
Net interest income (NII) on a tax-equivalent basis declined marginally to $237.5 million. NIM (on a tax-equivalent basis) was 2.97%, contracting 29 basis points (bps).
Non-interest income was $93.4 million, growing 11.5%. The rise was driven by a jump in almost all fee income components except for secondary mortgage market operations fees.
Total non-interest expenses declined modestly to $194.7 million. This was mainly attributable to a rise in other expenses, net occupancy and equipment expenses, and personnel expenses.
Efficiency ratio decreased to 57.44% from 59.29% in the year-ago quarter. A decline in efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2021, total loans were $20.9 billion, down 1.2% from the prior-quarter end. Total deposits fell marginally to $29.2 billion.
Credit Quality Improves
Provision for loan losses was a benefit of $27 million against a provision of $25 million in the prior-year quarter. Net charge-offs (annualized) were 0.03% of average total loans, down 40 bps from the year-ago quarter.
Total non-performing assets plummeted 62.6% to $71.9 million.
Capital & Profitability Ratios Improve
As of Sep 30, 2021, Tier 1 leverage ratio was 8.15%, up from 7.70% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 11.19%, up from 10.30% as of Sep 30, 2020.
At the end of the third quarter, return on average assets was 1.46%, up from the year-ago period’s 0.97%. Return on average common equity was 14.26%, up from 9.42% in the prior-year quarter.
Share Repurchase Update
During the quarter, Hancock Whitney repurchased 56,349 shares at an average price of $44.49 per share.
Fourth-Quarter 2021 Outlook
The company expects up to $500 million worth of paycheck protection program (PPP) loans to be forgiven, which will result in a total remaining balance in the range of $400-$500 million as of Dec 31, 2021. Total core loans (excluding PPP) are expected to be up $400-$500 million sequentially.
Total deposits are expected to be up $100-$200 million from the third quarter. Deposit costs are projected to be relatively stable as pricing discipline remains in place.
The company forecasts NIM contraction of nearly 4 bps due to excess liquidity and PPP forgiveness while NII (FTE) is expected to fall modestly on a sequential basis.
Further, fee income is expected to be relatively stable sequentially.
Management expects a modest reserve release.
Non-interest expenses (excluding one-time early retirement costs) are expected to be $187 million. This will be a run-rate for 2022 overall expenses. Efficiency is projected to be 57.4%.
Effective tax rate is anticipated to be 19-20%.
Full-Year 2021 Outlook
Management expects total core loans to be nearly $20.4 billion or up 3% year over year. Yet, the timing of commercial real estate payoff will impact the guidance.
Total deposits are expected to be roughly $29.4 billion or record growth of 6% from 2020-level.
NIM is expected to contract nearly 30 bps.
NII is anticipated to be down almost 1%, mainly due to lower rates, PPP forgiveness, and limited loan growth.
Fee income is expected to rise roughly 9% as improvements in most fee categories are likely to be partially offset by lower secondary mortgage fees.
Non-interest expenses are anticipated to be down 3%.
Effective tax rate is anticipated to be 19-20%.
Path to 55% Efficiency Ratio
Hancock Whitney targets to achieve an efficiency ratio of 55% by the fourth quarter 2022-end. For this, management has come up with revenue and efficiency strategies that will continue in the next year.
The company projects continued momentum in core loan growth at a mid-single digit rate and to maintain quarterly expenses at $187 million (as projection for fourth-quarter 2021) in 2022. Further, the company tends to have additional efficiency initiatives like strategic procurements that will support cost saving plan. Also, to improve revenues, the company has been hiring bankers in growth and new markets across its footprint, with more such hiring planned for 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.47% due to these changes.
VGM Scores
At this time, Hancock Whitney has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hancock Whitney has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Hancock Whitney (HWC) Up 0.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hancock Whitney due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hancock Whitney Q3 Earnings & Revenues Beat, Costs Down
Hancock Whitney’s third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Results gained from higher non-interest income, fall in operating expenses, and provision benefit. However, a decline in net interest income, which reflected lower interest rates and a fall in loan balance, was the undermining factor.
Results excluded the impact of non-operating items. Including these, net income came in at $129.6 million, up from $79.3 million in the prior-year quarter.
Revenues Improve, Expenses Inch Down
Total revenues were $328.1 million, up 2.9% year over year. The top line beat the Zacks Consensus Estimate of $324 million.
Net interest income (NII) on a tax-equivalent basis declined marginally to $237.5 million. NIM (on a tax-equivalent basis) was 2.97%, contracting 29 basis points (bps).
Non-interest income was $93.4 million, growing 11.5%. The rise was driven by a jump in almost all fee income components except for secondary mortgage market operations fees.
Total non-interest expenses declined modestly to $194.7 million. This was mainly attributable to a rise in other expenses, net occupancy and equipment expenses, and personnel expenses.
Efficiency ratio decreased to 57.44% from 59.29% in the year-ago quarter. A decline in efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2021, total loans were $20.9 billion, down 1.2% from the prior-quarter end. Total deposits fell marginally to $29.2 billion.
Credit Quality Improves
Provision for loan losses was a benefit of $27 million against a provision of $25 million in the prior-year quarter. Net charge-offs (annualized) were 0.03% of average total loans, down 40 bps from the year-ago quarter.
Total non-performing assets plummeted 62.6% to $71.9 million.
Capital & Profitability Ratios Improve
As of Sep 30, 2021, Tier 1 leverage ratio was 8.15%, up from 7.70% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 11.19%, up from 10.30% as of Sep 30, 2020.
At the end of the third quarter, return on average assets was 1.46%, up from the year-ago period’s 0.97%. Return on average common equity was 14.26%, up from 9.42% in the prior-year quarter.
Share Repurchase Update
During the quarter, Hancock Whitney repurchased 56,349 shares at an average price of $44.49 per share.
Fourth-Quarter 2021 Outlook
The company expects up to $500 million worth of paycheck protection program (PPP) loans to be forgiven, which will result in a total remaining balance in the range of $400-$500 million as of Dec 31, 2021. Total core loans (excluding PPP) are expected to be up $400-$500 million sequentially.
Total deposits are expected to be up $100-$200 million from the third quarter. Deposit costs are projected to be relatively stable as pricing discipline remains in place.
The company forecasts NIM contraction of nearly 4 bps due to excess liquidity and PPP forgiveness while NII (FTE) is expected to fall modestly on a sequential basis.
Further, fee income is expected to be relatively stable sequentially.
Management expects a modest reserve release.
Non-interest expenses (excluding one-time early retirement costs) are expected to be $187 million. This will be a run-rate for 2022 overall expenses. Efficiency is projected to be 57.4%.
Effective tax rate is anticipated to be 19-20%.
Full-Year 2021 Outlook
Management expects total core loans to be nearly $20.4 billion or up 3% year over year. Yet, the timing of commercial real estate payoff will impact the guidance.
Total deposits are expected to be roughly $29.4 billion or record growth of 6% from 2020-level.
NIM is expected to contract nearly 30 bps.
NII is anticipated to be down almost 1%, mainly due to lower rates, PPP forgiveness, and limited loan growth.
Fee income is expected to rise roughly 9% as improvements in most fee categories are likely to be partially offset by lower secondary mortgage fees.
Non-interest expenses are anticipated to be down 3%.
Effective tax rate is anticipated to be 19-20%.
Path to 55% Efficiency Ratio
Hancock Whitney targets to achieve an efficiency ratio of 55% by the fourth quarter 2022-end. For this, management has come up with revenue and efficiency strategies that will continue in the next year.
The company projects continued momentum in core loan growth at a mid-single digit rate and to maintain quarterly expenses at $187 million (as projection for fourth-quarter 2021) in 2022. Further, the company tends to have additional efficiency initiatives like strategic procurements that will support cost saving plan. Also, to improve revenues, the company has been hiring bankers in growth and new markets across its footprint, with more such hiring planned for 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.47% due to these changes.
VGM Scores
At this time, Hancock Whitney has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hancock Whitney has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.