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People's United's (PBCT) Q1 Earnings In line, Revenues Up

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People's United Financial Inc. reported net earnings of 30 cents per share in first-quarter 2018, in line with the Zacks Consensus Estimate. The reported figure improved 36.4% year over year.

Rising rates and higher fee income supported results. Growth in loan and deposit balances reflected organic growth. However, elevated expenses and provisions remained major drags.

Net income available to common shareholders came in at $104.4 million compared with $67.3 million reported in the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Net revenues, on a fully-taxable basis, were up 14.5% year over year to $392.5 million in the quarter. However, results lagged the Zacks Consensus Estimate of $394 million.

Net interest income, on a fully-taxable basis, totaled $302.1 million, up 17% year over year. Further, net interest margin expanded 23 basis points (bps) year over year to 3.05%.

Non-interest income climbed 6.7% year over year to $90.4 million. The rise in almost all components of income drove the results. These were partially offset by lower other non-interest income.

Non-interest expenses flared up 7.7% on a year-over-year basis to $243.5 million. Rise in all components, except other non-interest expenses and amortization of other acquisition-related intangible assets, led to higher expenses.

Efficiency ratio was 59.4%, in line with the prior-year period.

As of Mar 31, 2018, total loans were $32.1 billion, up 8.1% from the prior-year quarter. Furthermore, total deposits increased approximately 7.9% to $32.9 billion from the year-ago quarter.

Credit Quality: A Mixed Bag

As of Mar 31, 2018, non-performing assets were $174 million, down 4.9% year over year. Ratio of non-performing loans to total originated loans contracted 3 bps from the year-earlier quarter to 0.52%.

However, net loan charge-offs climbed 25% year over year to $3 million. Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.06%, up 3 bps year over year. Provision for loan losses came in at $5.4 million, up 22.7% year over year.

Capital Position Stable, Profitability Ratios Improve

Capital ratios of People’s United displayed mixed results. As of Mar 31, 2018, total risk-based capital ratio dropped to 12.6% from 12.7% recorded in the comparable quarter last year. Tangible equity ratio was 7.3%, down from 7.4% in the year-ago quarter.

The company’s profitability ratios improved. Return on average tangible stockholders’ equity was 13.8%, up from 9.6% in the prior-year quarter. Return on average assets of 0.98% inched up from 0.70% reported in the year-earlier quarter.

Dividend Update

Concurrent with the earnings release, People’s United’s board of directors hiked the quarterly common stock dividend to 17.50 cents per share, up 1.4% from the prior payout. The new dividend will be paid on May 15 to common shareholders of record as on May 1, 2018.

Our Viewpoint

People’s United reported an impressive quarter. Organic growth was experienced with rising loans and deposit balances. Though escalating non-interest expenses are expected to restrict bottom-line expansion in the upcoming quarters, the company is steadily growing through acquisitions, which is likely to continue in the near future, given its strong balance-sheet position.
 

Currently, People’s United 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

Driven by top-line strength, Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of around 0.7% in first-quarter 2018. Earnings per share of $1.38 outpaced the Zacks Consensus Estimate by a penny. Additionally, results compared favorably with 80 cents recorded in the prior-year quarter. Results were driven by rise in revenues. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses and provisions remained the undermining factors.

M&T Bank (MTB - Free Report) reported net operating earnings of $2.26 per share in first-quarter 2018. The bottom line improved 5.1% year over year. In addition, top-line growth was recorded. Moreover, improved credit quality was a positive factor. Further, pressure on margin eased. However, decrease in loan and deposit balances was a headwind. Also, results were affected by higher expenses.

Comerica (CMA - Free Report) reported adjusted earnings per share of $1.54 in first-quarter 2018, up from the prior-year quarter adjusted figure of $1.02 on high interest income. Including certain non-recurring items, earnings came in at $1.59. The Zacks Consensus Estimate was $1.49. Higher revenues and improved credit metrics were recorded. Moreover, rise in loans was another tailwind. However, lower deposits and rise in expenses were undermining factors.

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