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UMB Financial (UMBF) Q4 Earnings Disappoint, Provisions Up
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UMB Financial (UMBF - Free Report) recorded a negative earnings surprise of 49.5% in fourth-quarter 2018. Net operating earnings of 56 cents per share lagged the Zacks Consensus Estimate of $1.11. The reported figure compares unfavorably with the prior-year quarter’s earnings of 95 cents.
Lower non-interest income, higher provisions and elevated expenses were the major drags. However, higher revenues, aided by rising loans and deposit balances, supported the results. Rising rates aiding its net interest margin was another positive.
Including certain non-recurring items, the company reported net income of $25.5 million or 52 cents per share for the quarter under review, down from $47.4 million or 95 cents recorded in the prior-year quarter.
For 2018, net operating earnings came in at $200.7 million or $4.03 per share, up from $183.7 million or $3.69 recorded in 2017. Including certain non-recurring items, net income was $196.3 million or $3.94 per share, up from $183 million or $3.67 recorded in the prior year.
Increase in Revenues, Loans & Deposits Balance, Costs Flare Up
For 2018, total revenues came in at $1.01 billion, up 3% year over year. However, the figure lagged the Zacks Consensus Estimate of $1.02 billion.
Total revenues for the Oct-Dec quarter came in at $256.8 million, up 1.8% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $261.3 million.
Net interest income was $161.8 million, reflecting an increase of 10.6% from the year-ago quarter. Increase in average loans, along with elevated average loan yields, mainly led to this upside. Net Interest Margin (NIM) expanded 3 basis points (bps) to 3.24% from the prior-year quarter.
Non-interest income totaled $95 million, down 10.4% year over year. The downside resulted from a fall in most of the income components, except brokerage fees.
Non-interest expenses (GAAP basis) came in at $184.3 million, up 1% from the year-ago tally, mainly due to elevated legal and consulting expenses. Adjusted non-interest expenses were $181.6 million, down 0.4% year over year.
Efficiency ratio (GAAP basis) declined to 71.26% from 71.70% in the prior-year quarter. Fall in efficiency ratio indicates improvement in profitability. Adjusted efficiency ratio was 70.19%, down from 71.59% in the prior-year quarter.
As of Dec 31, 2018, average loans and leases were around $12 billion, up 2.6% sequentially. Additionally, average deposits climbed 10.3% from the prior-quarter end to $18.2 billion.
Credit Quality: A Mixed Bag
Total non-accrual and restructured loans came in at $43 million, down 27.2% year over year. Yet, provision for loan losses came in at $48 million, up from $6 million in the year-earlier quarter. Also, the ratio of net charge-offs to average loans was 1.51% in the reported quarter, up 137 bps from the year-ago quarter.
Strong Capital & Profitability Ratios
As of Dec 31, 2018, Tier 1 risk-based capital ratio was 12.89% compared with 12.95% as of Dec 31, 2017. Further, total risk-based capital ratio was 13.95% compared with 14.04% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.87% compared with 9.94% as of Dec 31, 2017.
Adjusted return on average assets at the quarter end was 0.50%, down from 0.91% in the year-ago quarter. Additionally, return on average tangible common equity was 4.95% compared with 8.75% in the prior-year quarter.
Conclusion
UMB Financial reported a decent quarter. Organic growth is expected to continue, backed by higher revenues. Moreover, soaring loan balances and an expanding net interest margin are likely to act as tailwinds. Furthermore, the company’s efficiency ratio has been declining on a continued basis, which signals better profitability over the long run.
Nevertheless, elevated expenses, higher provisions and lower fee income may dampen the company’s revenues. In addition, intense competition from other FinTech companies and online service providers remains another concern.
UMB Financial Corporation Price, Consensus and EPS Surprise
Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 4.3% in fourth-quarter 2018, riding on higher revenues. Adjusted earnings per share of 98 cents topped the Zacks Consensus Estimate of 94 cents. Also, the bottom line improved 38% from the prior-year quarter.
Signature Bank’s (SBNY - Free Report) fourth-quarter 2018 earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.79. Further, the bottom line compared favorably with $2.11 earned in the prior-year quarter.
People's United Financial Inc. reported fourth-quarter 2018 operating earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, the reported figure improved 16% year over year.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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UMB Financial (UMBF) Q4 Earnings Disappoint, Provisions Up
UMB Financial (UMBF - Free Report) recorded a negative earnings surprise of 49.5% in fourth-quarter 2018. Net operating earnings of 56 cents per share lagged the Zacks Consensus Estimate of $1.11. The reported figure compares unfavorably with the prior-year quarter’s earnings of 95 cents.
Lower non-interest income, higher provisions and elevated expenses were the major drags. However, higher revenues, aided by rising loans and deposit balances, supported the results. Rising rates aiding its net interest margin was another positive.
Including certain non-recurring items, the company reported net income of $25.5 million or 52 cents per share for the quarter under review, down from $47.4 million or 95 cents recorded in the prior-year quarter.
For 2018, net operating earnings came in at $200.7 million or $4.03 per share, up from $183.7 million or $3.69 recorded in 2017. Including certain non-recurring items, net income was $196.3 million or $3.94 per share, up from $183 million or $3.67 recorded in the prior year.
Increase in Revenues, Loans & Deposits Balance, Costs Flare Up
For 2018, total revenues came in at $1.01 billion, up 3% year over year. However, the figure lagged the Zacks Consensus Estimate of $1.02 billion.
Total revenues for the Oct-Dec quarter came in at $256.8 million, up 1.8% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $261.3 million.
Net interest income was $161.8 million, reflecting an increase of 10.6% from the year-ago quarter. Increase in average loans, along with elevated average loan yields, mainly led to this upside. Net Interest Margin (NIM) expanded 3 basis points (bps) to 3.24% from the prior-year quarter.
Non-interest income totaled $95 million, down 10.4% year over year. The downside resulted from a fall in most of the income components, except brokerage fees.
Non-interest expenses (GAAP basis) came in at $184.3 million, up 1% from the year-ago tally, mainly due to elevated legal and consulting expenses. Adjusted non-interest expenses were $181.6 million, down 0.4% year over year.
Efficiency ratio (GAAP basis) declined to 71.26% from 71.70% in the prior-year quarter. Fall in efficiency ratio indicates improvement in profitability. Adjusted efficiency ratio was 70.19%, down from 71.59% in the prior-year quarter.
As of Dec 31, 2018, average loans and leases were around $12 billion, up 2.6% sequentially. Additionally, average deposits climbed 10.3% from the prior-quarter end to $18.2 billion.
Credit Quality: A Mixed Bag
Total non-accrual and restructured loans came in at $43 million, down 27.2% year over year. Yet, provision for loan losses came in at $48 million, up from $6 million in the year-earlier quarter. Also, the ratio of net charge-offs to average loans was 1.51% in the reported quarter, up 137 bps from the year-ago quarter.
Strong Capital & Profitability Ratios
As of Dec 31, 2018, Tier 1 risk-based capital ratio was 12.89% compared with 12.95% as of Dec 31, 2017. Further, total risk-based capital ratio was 13.95% compared with 14.04% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.87% compared with 9.94% as of Dec 31, 2017.
Adjusted return on average assets at the quarter end was 0.50%, down from 0.91% in the year-ago quarter. Additionally, return on average tangible common equity was 4.95% compared with 8.75% in the prior-year quarter.
Conclusion
UMB Financial reported a decent quarter. Organic growth is expected to continue, backed by higher revenues. Moreover, soaring loan balances and an expanding net interest margin are likely to act as tailwinds. Furthermore, the company’s efficiency ratio has been declining on a continued basis, which signals better profitability over the long run.
Nevertheless, elevated expenses, higher provisions and lower fee income may dampen the company’s revenues. In addition, intense competition from other FinTech companies and online service providers remains another concern.
UMB Financial Corporation Price, Consensus and EPS Surprise
UMB Financial Corporation Price, Consensus and EPS Surprise | UMB Financial Corporation Quote
UMB Financial currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 4.3% in fourth-quarter 2018, riding on higher revenues. Adjusted earnings per share of 98 cents topped the Zacks Consensus Estimate of 94 cents. Also, the bottom line improved 38% from the prior-year quarter.
Signature Bank’s (SBNY - Free Report) fourth-quarter 2018 earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.79. Further, the bottom line compared favorably with $2.11 earned in the prior-year quarter.
People's United Financial Inc. reported fourth-quarter 2018 operating earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, the reported figure improved 16% year over year.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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