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People's United (PBCT) Tops Q3 Earnings on High Revenues
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People's United Financial Inc.’s third-quarter 2016 operating earnings of 25 cents per share surpassed the Zacks Consensus Estimate of 23 cents. The reported figure was also up 8.7% year over year.
Higher revenues, driven by increased net interest income as well as non-interest income aided earnings. Further, growth in loans and deposit balances were the other positives. However, rise in non-interest expenses and higher provisions acted as a drag.
Net income came in at $73.7 million or 24 cents per share compared with $68.4 million or 23 cents per share in the prior-year quarter.
Net revenue grew 4.4% year over year to $336.1 million in the quarter and also surpassed the Zacks Consensus Estimate of $334.9 million.
Net interest income on a fully taxable basis totaled $254.2 million, up 5.4% year over year. However, net interest margin fell 7 basis points (bps) year over year to 2.8%.
Non-interest income climbed 4.2% year over year to $90.8 million. Higher investment management fees, operating lease income, insurance revenue and other non-interest income were the primary reasons for the rise.
However, non-interest expenses increased 3.4% on a year-over-year basis to $221.4 million. Rise in compensation and benefits, occupancy and equipment expenses, professional and outside services and other non-interest expenses mostly led to the increase.
As of Sep 30, 2016, total loans were $29.4 billion, up 1.4% from the previous quarter. Moreover, total deposits increased approximately 2.3% to $29.7 billion from the prior-quarter end.
Credit Quality: A Mixed Bag
Overall, credit quality metrics at People’s United were mixed.
As of Sep 30, 2016, non-performing assets were $180.1 million, down 14.1% year over year. Ratio of non-performing loans to total originated loans declined 14 bps year over year to 0.54%. Also, net loan charge-offs decreased 39% year over year to $2.5 million.
However, provision for loan losses was $8.4 million, up 35.5% year over year.
Strong Capital Position; Profitability Ratios Improve
Capital ratios of People’s United portrayed a strong financial position. As of Sep 30, 2016, total risk-based capital ratio edged down to 11.5% from 11.8% in the year-ago quarter. Further, tangible equity ratio contracted to 7.2% from 7.5% in the prior-year quarter.
The company’s profitability ratios were strong. Return on average tangible stockholders’ equity came in at 10.7%, up from the prior-year quarter figure of 10.5%. Return on average assets of 0.73% was in line with the year-ago quarter.
Our Viewpoint
People’s United reported a decent quarter with healthy organic growth. Moreover, considerable improvement in the loan origination front proved beneficial for the company. Also, we remain encouraged by the company’s steady capital deployment measures.
However, margin pressure and rising non-interest expenses are expected to limit bottom-line expansion in the upcoming quarters.
Among the other financial savings and loan institutions, Banner Corporation (BANR - Free Report) and OceanFirst Financial Corp. (OCFC - Free Report) are expected to release quarter-end results on Oct 26 while Investors Bancorp Inc. is expected to release results on Oct 27.
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People's United (PBCT) Tops Q3 Earnings on High Revenues
People's United Financial Inc.’s third-quarter 2016 operating earnings of 25 cents per share surpassed the Zacks Consensus Estimate of 23 cents. The reported figure was also up 8.7% year over year.
Higher revenues, driven by increased net interest income as well as non-interest income aided earnings. Further, growth in loans and deposit balances were the other positives. However, rise in non-interest expenses and higher provisions acted as a drag.
Net income came in at $73.7 million or 24 cents per share compared with $68.4 million or 23 cents per share in the prior-year quarter.
Revenues Grow, Expenses Rise
Net revenue grew 4.4% year over year to $336.1 million in the quarter and also surpassed the Zacks Consensus Estimate of $334.9 million.
Net interest income on a fully taxable basis totaled $254.2 million, up 5.4% year over year. However, net interest margin fell 7 basis points (bps) year over year to 2.8%.
Non-interest income climbed 4.2% year over year to $90.8 million. Higher investment management fees, operating lease income, insurance revenue and other non-interest income were the primary reasons for the rise.
However, non-interest expenses increased 3.4% on a year-over-year basis to $221.4 million. Rise in compensation and benefits, occupancy and equipment expenses, professional and outside services and other non-interest expenses mostly led to the increase.
As of Sep 30, 2016, total loans were $29.4 billion, up 1.4% from the previous quarter. Moreover, total deposits increased approximately 2.3% to $29.7 billion from the prior-quarter end.
Credit Quality: A Mixed Bag
Overall, credit quality metrics at People’s United were mixed.
As of Sep 30, 2016, non-performing assets were $180.1 million, down 14.1% year over year. Ratio of non-performing loans to total originated loans declined 14 bps year over year to 0.54%. Also, net loan charge-offs decreased 39% year over year to $2.5 million.
However, provision for loan losses was $8.4 million, up 35.5% year over year.
Strong Capital Position; Profitability Ratios Improve
Capital ratios of People’s United portrayed a strong financial position. As of Sep 30, 2016, total risk-based capital ratio edged down to 11.5% from 11.8% in the year-ago quarter. Further, tangible equity ratio contracted to 7.2% from 7.5% in the prior-year quarter.
The company’s profitability ratios were strong. Return on average tangible stockholders’ equity came in at 10.7%, up from the prior-year quarter figure of 10.5%. Return on average assets of 0.73% was in line with the year-ago quarter.
Our Viewpoint
People’s United reported a decent quarter with healthy organic growth. Moreover, considerable improvement in the loan origination front proved beneficial for the company. Also, we remain encouraged by the company’s steady capital deployment measures.
However, margin pressure and rising non-interest expenses are expected to limit bottom-line expansion in the upcoming quarters.
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People’s United currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among the other financial savings and loan institutions, Banner Corporation (BANR - Free Report) and OceanFirst Financial Corp. (OCFC - Free Report) are expected to release quarter-end results on Oct 26 while Investors Bancorp Inc. is expected to release results on Oct 27.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>.