People's United Financial Inc. reported second-quarter 2016 earnings of 23 cents per share, beating the Zacks Consensus Estimate by a penny. The reported figure was also higher than the prior-year quarter figure of 20 cents.
Higher revenues driven by increased net interest income as well as non-interest income aided earnings. Further, growth in loans and deposit balances were the other positives. However, rise in non-interest expenses and higher provisions acted as a drag.
Net income came in at $68.5 million, up 11% year over year.
Organic Growth Reflected; Expenses Rises
Net revenue on a fully taxable equivalent basis grew 4.1% year over year to $333.1 million in second-quarter 2016 and also surpassed the Zacks Consensus Estimate of $331.6 million.
Net interest income totaled $247.7 million, up 4.5% year over year. This can be attributed to an increase in total interest and dividend income, partially offset by a rise in total interest expense. Net interest margin fell 9 basis points (bps) year over year to 2.79%.
Non-interest income climbed 2.9% year over year to $85.4 million. Higher insurance revenue, customer interest rate swap income, net and other non-interest income were the primary reasons for the rise.
Non-interest expenses increased slightly on a year-over-year basis to $212.9 million. Rise in compensation and benefits along with occupancy and equipment expenses were mostly counteracted by fall in other components of expenses.
As of Jun 30, 2016, total loans grew 5.1% year over year to $29.0 billion. Moreover, total deposits increased 5.8% on a year-over-year basis to $29.0 billion.
Credit Metrics: A Mixed Bag
Overall, credit quality metrics at People’s United were mixed. As of Jun 30, 2016, non-performing assets came in at $182 million, down 17.5% year over year. Ratio of non-performing loans to total originated loans declined 15 bps year over year to 0.56% during the quarter. However, provision for loan losses was $10.5 million, up 45.8% year over year.
Even total allowance for loan losses jumped 7.3% year over year to $220.4 million.
Strong Capital & Profitability Ratios
Capital ratios of People’s United portrayed a strong financial position. As of Jun 30, 2016, total risk-based capital ratio edged down to 11.4% from 11.8% in the year-ago quarter. Further, tangible equity ratio contracted to 7.2% from 7.4% recorded in the prior-year quarter.
The company’s profitability ratios were strong. Return on average tangible stockholders’ equity came in at 10.1%, up from the prior-year quarter tally of 9.5%. Return on average assets increased to 0.70% from 0.67% in the year-ago quarter.
Our Viewpoint
People’s United reported a decent quarter evident from its organic growth. Moreover, remarkable improvement on the loan origination front proved beneficial for the company. However, margin pressure and rising non-interest expenses are expected to limit bottom-line expansion in the upcoming quarters. At the same time, recent regulatory issues and higher provisions are anticipated to pose as the chief headwinds.
People’s United currently carries a Zacks Rank #4 (Sell).
Among the other financial savings and loan institutions, Banner Corporation (BANR - Free Report) is expected to release June quarter-end results on Jul 26, Westfield Financial Inc. on Aug 3 and Meta Financial Group, Inc. (CASH - Free Report) on Aug 4.
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People's United Financial Inc. reported second-quarter 2016 earnings of 23 cents per share, beating the Zacks Consensus Estimate by a penny. The reported figure was also higher than the prior-year quarter figure of 20 cents.
Higher revenues driven by increased net interest income as well as non-interest income aided earnings. Further, growth in loans and deposit balances were the other positives. However, rise in non-interest expenses and higher provisions acted as a drag.
Net income came in at $68.5 million, up 11% year over year.
Organic Growth Reflected; Expenses Rises
Net revenue on a fully taxable equivalent basis grew 4.1% year over year to $333.1 million in second-quarter 2016 and also surpassed the Zacks Consensus Estimate of $331.6 million.
Net interest income totaled $247.7 million, up 4.5% year over year. This can be attributed to an increase in total interest and dividend income, partially offset by a rise in total interest expense. Net interest margin fell 9 basis points (bps) year over year to 2.79%.
Non-interest income climbed 2.9% year over year to $85.4 million. Higher insurance revenue, customer interest rate swap income, net and other non-interest income were the primary reasons for the rise.
Non-interest expenses increased slightly on a year-over-year basis to $212.9 million. Rise in compensation and benefits along with occupancy and equipment expenses were mostly counteracted by fall in other components of expenses.
As of Jun 30, 2016, total loans grew 5.1% year over year to $29.0 billion. Moreover, total deposits increased 5.8% on a year-over-year basis to $29.0 billion.
Credit Metrics: A Mixed Bag
Overall, credit quality metrics at People’s United were mixed. As of Jun 30, 2016, non-performing assets came in at $182 million, down 17.5% year over year. Ratio of non-performing loans to total originated loans declined 15 bps year over year to 0.56% during the quarter. However, provision for loan losses was $10.5 million, up 45.8% year over year.
Even total allowance for loan losses jumped 7.3% year over year to $220.4 million.
Strong Capital & Profitability Ratios
Capital ratios of People’s United portrayed a strong financial position. As of Jun 30, 2016, total risk-based capital ratio edged down to 11.4% from 11.8% in the year-ago quarter. Further, tangible equity ratio contracted to 7.2% from 7.4% recorded in the prior-year quarter.
The company’s profitability ratios were strong. Return on average tangible stockholders’ equity came in at 10.1%, up from the prior-year quarter tally of 9.5%. Return on average assets increased to 0.70% from 0.67% in the year-ago quarter.
Our Viewpoint
People’s United reported a decent quarter evident from its organic growth. Moreover, remarkable improvement on the loan origination front proved beneficial for the company. However, margin pressure and rising non-interest expenses are expected to limit bottom-line expansion in the upcoming quarters. At the same time, recent regulatory issues and higher provisions are anticipated to pose as the chief headwinds.
People’s United currently carries a Zacks Rank #4 (Sell).
Among the other financial savings and loan institutions, Banner Corporation (BANR - Free Report) is expected to release June quarter-end results on Jul 26, Westfield Financial Inc. on Aug 3 and Meta Financial Group, Inc. (CASH - Free Report) on Aug 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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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