People's United Financial Inc. reported first-quarter 2021 operating earnings of 37 cents per share, which surpassed the Zacks Consensus Estimate of 34 cents. Also, the bottom line is above the year-ago quarter’s reported figure of 33 cents.
Results reflect improved deposit balances and controlled expenses. Also, a recovery in provision for credit losses and a strong capital position supported the company. However, lower revenues and reduced loans were headwinds.
After considering certain non-recurring items, net income available to common shareholders was $141 million or 33 cents per share compared with the $126.9 million or 30 cents reported in the prior-year quarter.
Reduced Expenses Offset Lower Revenues, Deposits Rise
Revenues were down 7.5% year over year to $488.1 million in the first quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $485.7 million.
Net interest income, on a fully taxable basis, totaled $393.5 million, down 2.5% year over year. Also, net interest margin contracted 38 basis points (bps) to 2.74%.
Non-interest income declined 23.6% year over year to $94.6 million. A fall in bank service charges, operating lease income, insurance revenues, net customer interest rate swap income and other non-interest income, were offset by rise in commercial banking lending fees, investment management fees and cash management fees.
Non-interest expenses dipped 2.6% on a year-over-year basis to $311.9 million. Decrease in all components, except for other expenses and amortization of other acquisition-related intangible assets, led to this decline.
Its efficiency ratio was 56.6% compared with the prior-year quarter’s 54%. An increase in the ratio indicates lower profitability.
As of Mar 31, 2021, total loans were $42.8 billion, down 2.5% from the prior quarter. However, total deposits grew 2.6% sequentially to $53.5 billion.
Credit Quality: A Mixed Bag
As of Mar 31, 2021, non-performing assets were $363.7 million, up 43% year over year. Ratio of non-performing loans to total loans expanded 29 bps from the year-earlier quarter to 0.83%.
Also, net loan charge-offs climbed 17% year over year to $12.4 million. Net loan charge-offs as a percentage of average total loans were 0.12% on an annualized basis, expanding 2 bps.
Yet, negative provision for loan losses was $13.6 million compared with the provision expense of $33.5 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Mar 31, 2021, total risk-based capital ratio increased to 12.8% from the 11.3% recorded in the year-earlier period. Tangible equity ratio of 7.4% was flat, year on year.
Return on average tangible stockholders’ equity was 12.5%, up from the prior-year quarter’s 11.8%. As of Mar 31, 2021, return on average assets was 0.9% compared with the year-ago quarter’s 0.89%.
Our Viewpoint
Though fall in revenues and muted loan growth might restrict bottom-line expansion in the upcoming quarters, People’s United’s steady growth through acquisitions is encouraging. This is likely to continue in the near future as well, supported by its robust balance-sheet position and controlled expenses.
Currently, People’s United carries 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
Fifth Third Bancorp (FITB - Free Report) delivered an earnings surprise of 34.7% in first-quarter 2021. Earnings of 93 cents per share surpassed the Zacks Consensus Estimate of 69 cents. Results also compared favorably with the prior-year quarter’s earnings of 13 cents.
Comerica (CMA - Free Report) delivered first-quarter earnings surprise of 76.1%. Earnings per share of $2.43 comfortably surpassed the Zacks Consensus Estimate of $1.38. Also, the bottom line compared favorably with the loss of 46 cents reported in the prior-year quarter.
M&T Bank Corp. (MTB - Free Report) reported first-quarter earnings surprise of 15%. Net operating earnings per share of $3.41 beat the Zacks Consensus Estimate of $2.96. Also, the bottom line compared favorably with the $1.95 per share reported in the year-ago quarter.
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People's United Financial Inc. reported first-quarter 2021 operating earnings of 37 cents per share, which surpassed the Zacks Consensus Estimate of 34 cents. Also, the bottom line is above the year-ago quarter’s reported figure of 33 cents.
Results reflect improved deposit balances and controlled expenses. Also, a recovery in provision for credit losses and a strong capital position supported the company. However, lower revenues and reduced loans were headwinds.
After considering certain non-recurring items, net income available to common shareholders was $141 million or 33 cents per share compared with the $126.9 million or 30 cents reported in the prior-year quarter.
Reduced Expenses Offset Lower Revenues, Deposits Rise
Revenues were down 7.5% year over year to $488.1 million in the first quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $485.7 million.
Net interest income, on a fully taxable basis, totaled $393.5 million, down 2.5% year over year. Also, net interest margin contracted 38 basis points (bps) to 2.74%.
Non-interest income declined 23.6% year over year to $94.6 million. A fall in bank service charges, operating lease income, insurance revenues, net customer interest rate swap income and other non-interest income, were offset by rise in commercial banking lending fees, investment management fees and cash management fees.
Non-interest expenses dipped 2.6% on a year-over-year basis to $311.9 million. Decrease in all components, except for other expenses and amortization of other acquisition-related intangible assets, led to this decline.
Its efficiency ratio was 56.6% compared with the prior-year quarter’s 54%. An increase in the ratio indicates lower profitability.
As of Mar 31, 2021, total loans were $42.8 billion, down 2.5% from the prior quarter. However, total deposits grew 2.6% sequentially to $53.5 billion.
Credit Quality: A Mixed Bag
As of Mar 31, 2021, non-performing assets were $363.7 million, up 43% year over year. Ratio of non-performing loans to total loans expanded 29 bps from the year-earlier quarter to 0.83%.
Also, net loan charge-offs climbed 17% year over year to $12.4 million. Net loan charge-offs as a percentage of average total loans were 0.12% on an annualized basis, expanding 2 bps.
Yet, negative provision for loan losses was $13.6 million compared with the provision expense of $33.5 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Mar 31, 2021, total risk-based capital ratio increased to 12.8% from the 11.3% recorded in the year-earlier period. Tangible equity ratio of 7.4% was flat, year on year.
Return on average tangible stockholders’ equity was 12.5%, up from the prior-year quarter’s 11.8%. As of Mar 31, 2021, return on average assets was 0.9% compared with the year-ago quarter’s 0.89%.
Our Viewpoint
Though fall in revenues and muted loan growth might restrict bottom-line expansion in the upcoming quarters, People’s United’s steady growth through acquisitions is encouraging. This is likely to continue in the near future as well, supported by its robust balance-sheet position and controlled expenses.
Currently, People’s United carries 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
Fifth Third Bancorp (FITB - Free Report) delivered an earnings surprise of 34.7% in first-quarter 2021. Earnings of 93 cents per share surpassed the Zacks Consensus Estimate of 69 cents. Results also compared favorably with the prior-year quarter’s earnings of 13 cents.
Comerica (CMA - Free Report) delivered first-quarter earnings surprise of 76.1%. Earnings per share of $2.43 comfortably surpassed the Zacks Consensus Estimate of $1.38. Also, the bottom line compared favorably with the loss of 46 cents reported in the prior-year quarter.
M&T Bank Corp. (MTB - Free Report) reported first-quarter earnings surprise of 15%. Net operating earnings per share of $3.41 beat the Zacks Consensus Estimate of $2.96. Also, the bottom line compared favorably with the $1.95 per share reported in the year-ago quarter.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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