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Shares of Webster Financial (WBS - Free Report) gained around 1% following its fourth-quarter 2017 earnings release. Adjusted earnings per share of 71 cents compared favorably with 60 cents earned in the prior-year quarter. The Zacks Consensus Estimate for the quarter’s earnings was 67 cents.
Results reflected growth in revenues. Also, loan and deposit balances showed continued improvement along with a strong capital position. However, lower fee income and higher non-interest expenses were the undermining factors.
After considering the net benefit of $7.8 million from tax legislation, net income available to shareholders for the fourth quarter came in at $69.9 million, up 21.2% year over year.
For full-year 2017, Webster Financial reported net income available to common shareholders of $255.4 million or $2.67 per share compared with $198.4 million or $2.16 per share as of Dec 31, 2016.
Revenue Growth Offsets Higher Expenses
Webster Financial’s total revenues in the quarter rose 5.9% from the prior-year quarter to $271 million. The Zacks Consensus Estimate was $272 million.
For 2017, the company reported revenues of $1.06 billion, up 7.4% on a year-over-year basis.
Net interest income grew 10.6% year over year to $204.9 million. Moreover, net interest margin increased 22 basis points (bps) from the year-ago quarter to 3.33%.
Non-interest income was around $66 million, down nearly 6.5% year over year. The decline was primarily prompted by a fall in mortgage banking activities along with other income. These were, however, partially offset by higher deposit service fees and wealth and investment fees.
Non-interest expenses of $161.8 million climbed 3.7% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, technology and equipment along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio came in at 59.48% compared with 63.13% as of Dec 31, 2017. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Dec 31, 2017 were $17.5 billion, up slightly sequentially. Further total deposits rose marginally from the prior month to $21 billion.
Credit Quality Deteriorates
The ratio of net charge-offs to annualized average loans came in at 0.34%, up 19 bps from the prior-year quarter. Also, total nonperforming loans were $126.6 million, up 5.6% from $134 million in the year-ago quarter. Further, the allowance for loan losses represented 1.14% of total loans as of Dec 31, 2017 compared with 1.13% as of Dec 31, 2016.
Also, the provision for loan and lease losses rose 4% from the year-ago quarter to $13 million.
Improved Capital & Profitability Ratios
As of Dec 31, 2017, Tier 1 risk-based capital ratio was 11.91% compared with 11.19% as of Dec 31, 2016. Also, total risk-based capital ratio came in at 13.40% compared with 12.68% in the prior-year quarter. Tangible common equity ratio was 7.67%, up from 7.19% as of Dec 31, 2016.
The return on average assets was 1.05% in the reported quarter compared with 0.89% in the prior-year quarter. As of Dec 31, 2017, return on average common stockholders' equity came in at 10.66%, up from 9.26% as of Dec 31, 2016.
Our Viewpoint
Webster Financial reported strong quarterly results as reflected by improved revenues and loan balance. Its strong capital position keeps it well poised to undertake growth initiatives. Also, its efforts to expand HSA Bank segment bode well for long term. However, the increase in expenses and declining fee income keep us apprehensive.
Webster Financial Corporation Price, Consensus and EPS Surprise
First Horizon National Corporation (FHN - Free Report) reported fourth-quarter 2017 adjusted earnings per share of 30 cents, surpassing the Zacks Consensus Estimate of 29 cents by 3.4%. Results exclude tax reform-related adjustments and other one-time items.
Driven by top-line strength, Regions Financial Corporation (RF - Free Report) recorded an impressive earnings surprise of 3.8% in fourth-quarter 2017. Reported earnings of 27 cents per share outpaced the Zacks Consensus Estimate of 26 cents. Moreover, results compared favorably with the prior-year quarter’s earnings of 23 cents. Results included certain one-time items of 7 cents per share.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 6% in fourth-quarter 2017. Adjusted earnings per share of 71 cents topped the Zacks Consensus Estimate of 67 cents.
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Webster Financial (WBS) Q4 Earnings Improve Y/Y, Costs Rise
Shares of Webster Financial (WBS - Free Report) gained around 1% following its fourth-quarter 2017 earnings release. Adjusted earnings per share of 71 cents compared favorably with 60 cents earned in the prior-year quarter. The Zacks Consensus Estimate for the quarter’s earnings was 67 cents.
Results reflected growth in revenues. Also, loan and deposit balances showed continued improvement along with a strong capital position. However, lower fee income and higher non-interest expenses were the undermining factors.
After considering the net benefit of $7.8 million from tax legislation, net income available to shareholders for the fourth quarter came in at $69.9 million, up 21.2% year over year.
For full-year 2017, Webster Financial reported net income available to common shareholders of $255.4 million or $2.67 per share compared with $198.4 million or $2.16 per share as of Dec 31, 2016.
Revenue Growth Offsets Higher Expenses
Webster Financial’s total revenues in the quarter rose 5.9% from the prior-year quarter to $271 million. The Zacks Consensus Estimate was $272 million.
For 2017, the company reported revenues of $1.06 billion, up 7.4% on a year-over-year basis.
Net interest income grew 10.6% year over year to $204.9 million. Moreover, net interest margin increased 22 basis points (bps) from the year-ago quarter to 3.33%.
Non-interest income was around $66 million, down nearly 6.5% year over year. The decline was primarily prompted by a fall in mortgage banking activities along with other income. These were, however, partially offset by higher deposit service fees and wealth and investment fees.
Non-interest expenses of $161.8 million climbed 3.7% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, technology and equipment along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio came in at 59.48% compared with 63.13% as of Dec 31, 2017. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Dec 31, 2017 were $17.5 billion, up slightly sequentially. Further total deposits rose marginally from the prior month to $21 billion.
Credit Quality Deteriorates
The ratio of net charge-offs to annualized average loans came in at 0.34%, up 19 bps from the prior-year quarter. Also, total nonperforming loans were $126.6 million, up 5.6% from $134 million in the year-ago quarter. Further, the allowance for loan losses represented 1.14% of total loans as of Dec 31, 2017 compared with 1.13% as of Dec 31, 2016.
Also, the provision for loan and lease losses rose 4% from the year-ago quarter to $13 million.
Improved Capital & Profitability Ratios
As of Dec 31, 2017, Tier 1 risk-based capital ratio was 11.91% compared with 11.19% as of Dec 31, 2016. Also, total risk-based capital ratio came in at 13.40% compared with 12.68% in the prior-year quarter. Tangible common equity ratio was 7.67%, up from 7.19% as of Dec 31, 2016.
The return on average assets was 1.05% in the reported quarter compared with 0.89% in the prior-year quarter. As of Dec 31, 2017, return on average common stockholders' equity came in at 10.66%, up from 9.26% as of Dec 31, 2016.
Our Viewpoint
Webster Financial reported strong quarterly results as reflected by improved revenues and loan balance. Its strong capital position keeps it well poised to undertake growth initiatives. Also, its efforts to expand HSA Bank segment bode well for long term. However, the increase in expenses and declining fee income keep us apprehensive.
Webster Financial Corporation Price, Consensus and EPS Surprise
Webster Financial Corporation Price, Consensus and EPS Surprise | Webster Financial Corporation Quote
Webster Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
First Horizon National Corporation (FHN - Free Report) reported fourth-quarter 2017 adjusted earnings per share of 30 cents, surpassing the Zacks Consensus Estimate of 29 cents by 3.4%. Results exclude tax reform-related adjustments and other one-time items.
Driven by top-line strength, Regions Financial Corporation (RF - Free Report) recorded an impressive earnings surprise of 3.8% in fourth-quarter 2017. Reported earnings of 27 cents per share outpaced the Zacks Consensus Estimate of 26 cents. Moreover, results compared favorably with the prior-year quarter’s earnings of 23 cents. Results included certain one-time items of 7 cents per share.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 6% in fourth-quarter 2017. Adjusted earnings per share of 71 cents topped the Zacks Consensus Estimate of 67 cents.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 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 >>