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UMB Financial (UMBF) Tanks 10.3% as Q3 Earnings & Revenues Lag
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Shares of UMB Financial (UMBF - Free Report) have lost 10.3% since the release of its third-quarter 2022 results. Net operating income per share of $1.82 lagged the Zacks Consensus Estimate of $2.16. The bottom line also compares unfavorably with the prior-year quarter’s earnings of $1.95.
Results were adversely impacted by higher provisions for credit losses and a rise in non-interest expenses. Yet, higher revenues, driven by increase in net interest income (NII) and fee income, acted as a tailwind. A rise in average loans was another positive.
Net income (GAAP) was $88 million or $1.81 per share, down from $94.5 million or $1.94 per share in the prior-year quarter.
Revenues & Costs Rise, Average Loans Up
Total revenues (on a fully tax-equivalent basis or FTE) were $368.7 million, up 13.7% year over year. The top line missed the Zacks Consensus Estimate of $373 million.
NII, on an FTE basis, was $239.9 million, reflecting an increase of 10.9%. The increase was driven by organic loan growth and excess liquidity.
On FTE basis, the net interest margin expanded 24 basis points to 2.76%.
Non-interest income totaled $128.7 million, jumping 19.3%. The rise mainly resulted from higher trust and securities processing fees, brokerage fees, bankcard income, other income and net investment securities gains.
Non-interest expenses were $231.4 million, up 10.8%, mainly due to increase in salaries and employee benefits, legal and consulting expenses, and processing expenses.
The efficiency ratio was 63.58% compared with the prior-year quarter’s 65.62%. A decline in the efficiency ratio indicates improved profitability.
As of Sep 30, 2022, average loans and leases were $19.3 billion, up 5.3% from the prior quarter. This included paycheck protection program loan balances. Average deposits fell 5.7% to $29.8 billion.
Credit Quality: Mixed Bag
The ratio of net charge-offs to total average loans was 0.02% in the reported quarter, down from 0.07% in the year-ago quarter. Non-accrual and restructured loans were $19.8 million, declining 79.5% year over year.
The provision for credit losses was $22 million compared with a benefit of $5 million in the prior-year quarter.
Capital & Profitability Ratios Strong
As of Sep 30, 2022, the Tier 1 risk-based capital ratio was 11.18% compared with 12.26% as of Sep 30, 2021. The total risk-based capital ratio was 13.13% compared with 14.17% in the year-ago quarter. Tier 1 leverage ratio was 8.66% at the third-quarter end compared with 7.878% as of Sep 30, 2021.
Return on average assets at the quarter’s end was 0.96% compared with the year-ago quarter’s 1.04%. Also, return on average equity was 12.9% compared with 11.89% witnessed in the prior-year quarter.
Dividend Hike
UMB Financial’s board of directors announced a common stock quarterly dividend of 38 cents per share, marking a hike of 2.7% from the prior payout. The dividend will be paid out on Jan 3, 2023, to its shareholders of record as of Dec 12, 2022.
Conclusion
UMB Financial put up an impressive performance in the third quarter. The company’s efforts to diversify its non-interest income sources to reduce exposure to interest rates will support revenues in the quarters ahead. However, mounting costs and rising provisions on worsening economic outlook are major near-term concerns.
UMB Financial Corporation Price, Consensus and EPS Surprise
Bank of Hawaii Corporation’s (BOH - Free Report) third-quarter 2022 earnings per share of $1.28 missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined 15.8% from the year-ago quarter.
The results were hurt by higher expenses and a decline in non-interest income. Also, the company’s capital and profitability ratios deteriorated. However, supported by higher interest rates and robust loan balance, BOH witnessed an increase in NII.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher NII, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.
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UMB Financial (UMBF) Tanks 10.3% as Q3 Earnings & Revenues Lag
Shares of UMB Financial (UMBF - Free Report) have lost 10.3% since the release of its third-quarter 2022 results. Net operating income per share of $1.82 lagged the Zacks Consensus Estimate of $2.16. The bottom line also compares unfavorably with the prior-year quarter’s earnings of $1.95.
Results were adversely impacted by higher provisions for credit losses and a rise in non-interest expenses. Yet, higher revenues, driven by increase in net interest income (NII) and fee income, acted as a tailwind. A rise in average loans was another positive.
Net income (GAAP) was $88 million or $1.81 per share, down from $94.5 million or $1.94 per share in the prior-year quarter.
Revenues & Costs Rise, Average Loans Up
Total revenues (on a fully tax-equivalent basis or FTE) were $368.7 million, up 13.7% year over year. The top line missed the Zacks Consensus Estimate of $373 million.
NII, on an FTE basis, was $239.9 million, reflecting an increase of 10.9%. The increase was driven by organic loan growth and excess liquidity.
On FTE basis, the net interest margin expanded 24 basis points to 2.76%.
Non-interest income totaled $128.7 million, jumping 19.3%. The rise mainly resulted from higher trust and securities processing fees, brokerage fees, bankcard income, other income and net investment securities gains.
Non-interest expenses were $231.4 million, up 10.8%, mainly due to increase in salaries and employee benefits, legal and consulting expenses, and processing expenses.
The efficiency ratio was 63.58% compared with the prior-year quarter’s 65.62%. A decline in the efficiency ratio indicates improved profitability.
As of Sep 30, 2022, average loans and leases were $19.3 billion, up 5.3% from the prior quarter. This included paycheck protection program loan balances. Average deposits fell 5.7% to $29.8 billion.
Credit Quality: Mixed Bag
The ratio of net charge-offs to total average loans was 0.02% in the reported quarter, down from 0.07% in the year-ago quarter. Non-accrual and restructured loans were $19.8 million, declining 79.5% year over year.
The provision for credit losses was $22 million compared with a benefit of $5 million in the prior-year quarter.
Capital & Profitability Ratios Strong
As of Sep 30, 2022, the Tier 1 risk-based capital ratio was 11.18% compared with 12.26% as of Sep 30, 2021. The total risk-based capital ratio was 13.13% compared with 14.17% in the year-ago quarter. Tier 1 leverage ratio was 8.66% at the third-quarter end compared with 7.878% as of Sep 30, 2021.
Return on average assets at the quarter’s end was 0.96% compared with the year-ago quarter’s 1.04%. Also, return on average equity was 12.9% compared with 11.89% witnessed in the prior-year quarter.
Dividend Hike
UMB Financial’s board of directors announced a common stock quarterly dividend of 38 cents per share, marking a hike of 2.7% from the prior payout. The dividend will be paid out on Jan 3, 2023, to its shareholders of record as of Dec 12, 2022.
Conclusion
UMB Financial put up an impressive performance in the third quarter. The company’s efforts to diversify its non-interest income sources to reduce exposure to interest rates will support revenues in the quarters ahead. However, mounting costs and rising provisions on worsening economic outlook are major near-term concerns.
UMB Financial Corporation Price, Consensus and EPS Surprise
UMB Financial Corporation price-consensus-eps-surprise-chart | UMB Financial Corporation Quote
UMB Financial currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Bank of Hawaii Corporation’s (BOH - Free Report) third-quarter 2022 earnings per share of $1.28 missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined 15.8% from the year-ago quarter.
The results were hurt by higher expenses and a decline in non-interest income. Also, the company’s capital and profitability ratios deteriorated. However, supported by higher interest rates and robust loan balance, BOH witnessed an increase in NII.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher NII, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.