Webster Financial Corporation (WBS - Free Report) reported third-quarter 2022 adjusted earnings per share of $1.46, which surpassed the Zacks Consensus Estimate of $1.40. The reported figure excluded $36.8 million of expenses related to the Sterling Bancorp merger and expenses on strategic initiatives.
The overall performance of the company was driven by the acquisition of Sterling Bancorp on Jan 31, 2022. Notable increases in net interest income (NII) and fee income drove top-line growth. Shares of Webster Financial rose 2% following the release of its earnings results.
However, high expenses and a significant rise in non-performing assets were the undermining factors.
WBS reported net income applicable to common shareholders of $229.8 million in the third quarter, up 145.1% from the prior-year quarter’s $93.7 million.
Revenues & Expenses Increase, Total Loans Rise
Webster Financial’s total revenues in the quarter climbed 112% year over year to $664.6 million. However, the top line lagged the Zacks Consensus Estimate of $670.3 million.
The NII increased 139.9% year over year to $551 million. Net interest margin was 3.54%, up 74 basis points.
Total non-interest income was $113.6 million, up 35.6% year over year. The primary reason for this rise was an increase in loan and lease-related fees,wealth and investment services, and deposit service fees.
Non-interest expenses of $330.07 million jumped 83.1% from the year-ago quarter. An increase in all components drove the rise.
The efficiency ratio (non-GAAP) was 41.17%, down from 54.84% as of Sep 30, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Sep 30, 2022, were $47.8 billion, up 4.8% sequentially. Total deposits were up 1.8% from the previous quarter to $54 billion.
Credit Quality Declines
Total non-performing assets were $211.6 million as of Sep 30, 2022, up 103% from the year-ago quarter. A provision for credit losses of $36.5 million was recorded compared with $7.75 million in the prior-year quarter. The ratio of net charge-offs to annualized average loans and leases was 0.25% compared with 0.02% in the year-ago quarter.
Nonetheless, the allowance for credit losses on loans and leases represented 1.20% of total loans and leases, having shrunk from 1.46% as of Sep 30, 2021.
Capital Ratios Decline, Profitability Ratios Strong
As of Sep 30, 2022, Tier 1 risk-based capital ratio was 11.37% compared with 12.39% as of Sep 30, 2021. The total risk-based capital ratio was 13.41% compared with the prior-year quarter’s 13.79%. The tangible common equity (non-GAAP) ratio was 7.27%, down from 7.71% in the year-ago quarter.
The return on average assets was 1.38% in the reported quarter compared with the year-earlier quarter’s 1.10%. As of Sep 30, 2022, the return on average common stockholders' equity was 11.78%, up from 11.61% in the year-earlier quarter.
Our Viewpoint
The company’s results reflect strong growth in NII and fee income. WBS repurchased around $100 million in shares under its repurchase program. The strong profitability ratio was another positive factor.
However, the credit quality declined in the third quarter.
Webster Financial currently 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
Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2022 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.82. Nonetheless, the bottom line was flat year over year.
Higher revenues, aided by a rise in net interest income NII, were the driving factors for NTRS. However, a rising expense base and weak capital ratios were headwinds.
Citizens Financial Group (CFG - Free Report) reported third-quarter 2022 underlying earnings per share of $1.30, surpassing the Zacks Consensus Estimate of $1.20. Also, CFG’s bottom line rose from $1.22 in the year-ago quarter.
Results reflect NII growth on the rise in loan balances. However, an escalation in expenses was a spoilsport for Citizens Financial’s Q3 results.
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Webster Financial Corporation (WBS - Free Report) reported third-quarter 2022 adjusted earnings per share of $1.46, which surpassed the Zacks Consensus Estimate of $1.40. The reported figure excluded $36.8 million of expenses related to the Sterling Bancorp merger and expenses on strategic initiatives.
The overall performance of the company was driven by the acquisition of Sterling Bancorp on Jan 31, 2022. Notable increases in net interest income (NII) and fee income drove top-line growth. Shares of Webster Financial rose 2% following the release of its earnings results.
However, high expenses and a significant rise in non-performing assets were the undermining factors.
WBS reported net income applicable to common shareholders of $229.8 million in the third quarter, up 145.1% from the prior-year quarter’s $93.7 million.
Revenues & Expenses Increase, Total Loans Rise
Webster Financial’s total revenues in the quarter climbed 112% year over year to $664.6 million. However, the top line lagged the Zacks Consensus Estimate of $670.3 million.
The NII increased 139.9% year over year to $551 million. Net interest margin was 3.54%, up 74 basis points.
Total non-interest income was $113.6 million, up 35.6% year over year. The primary reason for this rise was an increase in loan and lease-related fees,wealth and investment services, and deposit service fees.
Non-interest expenses of $330.07 million jumped 83.1% from the year-ago quarter. An increase in all components drove the rise.
The efficiency ratio (non-GAAP) was 41.17%, down from 54.84% as of Sep 30, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Sep 30, 2022, were $47.8 billion, up 4.8% sequentially. Total deposits were up 1.8% from the previous quarter to $54 billion.
Credit Quality Declines
Total non-performing assets were $211.6 million as of Sep 30, 2022, up 103% from the year-ago quarter. A provision for credit losses of $36.5 million was recorded compared with $7.75 million in the prior-year quarter. The ratio of net charge-offs to annualized average loans and leases was 0.25% compared with 0.02% in the year-ago quarter.
Nonetheless, the allowance for credit losses on loans and leases represented 1.20% of total loans and leases, having shrunk from 1.46% as of Sep 30, 2021.
Capital Ratios Decline, Profitability Ratios Strong
As of Sep 30, 2022, Tier 1 risk-based capital ratio was 11.37% compared with 12.39% as of Sep 30, 2021. The total risk-based capital ratio was 13.41% compared with the prior-year quarter’s 13.79%. The tangible common equity (non-GAAP) ratio was 7.27%, down from 7.71% in the year-ago quarter.
The return on average assets was 1.38% in the reported quarter compared with the year-earlier quarter’s 1.10%. As of Sep 30, 2022, the return on average common stockholders' equity was 11.78%, up from 11.61% in the year-earlier quarter.
Our Viewpoint
The company’s results reflect strong growth in NII and fee income. WBS repurchased around $100 million in shares under its repurchase program. The strong profitability ratio was another positive factor.
However, the credit quality declined in the third quarter.
Webster Financial currently 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
Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2022 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.82. Nonetheless, the bottom line was flat year over year.
Higher revenues, aided by a rise in net interest income NII, were the driving factors for NTRS. However, a rising expense base and weak capital ratios were headwinds.
Citizens Financial Group (CFG - Free Report) reported third-quarter 2022 underlying earnings per share of $1.30, surpassing the Zacks Consensus Estimate of $1.20. Also, CFG’s bottom line rose from $1.22 in the year-ago quarter.
Results reflect NII growth on the rise in loan balances. However, an escalation in expenses was a spoilsport for Citizens Financial’s Q3 results.
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
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