Webster Financial (WBS - Free Report) reported a positive earnings surprise of 5% in first-quarter 2019. Adjusted earnings per share of $1.06 surpassed the Zacks Consensus Estimate of $1.01. Also, the bottom line increased 24.7% from the prior-year quarter.
Results reflect growth in revenues, with support from higher loans and deposits, along with improving interest margin. Also, lower provisions and the company’s strong capital position were a tailwind. However, investors’ disappointment was visible on rising expenses and lower fee income which led its share price to decline 2.6%, following the release.
After considering several non-recurring items, the company reported earnings applicable to common shareholders of $97.5 million or $1.06 per share, significantly up from $78.1 million or 85 cents in the prior-year quarter.
Revenue Growth Mitigates Higher Expenses, Loans Increase
Webster Financial’s total revenues in the first quarter increased 9.6%, year over year, to $310.2 million. The top-line figure came in line with the Zacks Consensus Estimate.
Net interest income grew 12.8% year over year to $241.6 million. Moreover, net interest margin expanded 30 basis points (bps) to 3.74%.
Non-interest income was around $68.6 million, slightly down year over year. The downside primarily resulted from a fall in income from wealth and investment services, mortgage banking activities and other income.
Non-interest expenses of $175.7 million escalated 2.4% from the year-ago quarter. This upswing mainly resulted from higher compensation and benefits expenses, technology and equipment, along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio (on a non-GAAP basis) came in at 55.93% compared with 59.76% as of Mar 31, 2018. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Mar 31, 2019 were $18.81 billion, up 1.9% sequentially. Further, total deposits increased 4.1% from the previous quarter to $22.8 billion.
Credit Quality: A Mixed Bag
Total non-performing assets were $164.4 million, up 17.4% from the year-ago quarter. In addition, the ratio of net charge-offs to annualized average loans came in at 0.21%, up 8 bps year over year.
However, allowance for loan losses represented 1.12% of total loans as of Mar 31, 2019, down 3 bps from Mar 31, 2018. Also, the provision for loan and lease losses slipped 21.8% to $8.6 million.
Improved Capital & Profitability Ratios
As of Mar 31, 2019, Tier 1 risk-based capital ratio was 12.17% compared with 11.75% as of Mar 31, 2018. Additionally, total risk-based capital ratio came in at 13.60% compared with 13.24% in the prior-year quarter. Tangible common equity ratio was 8.16%, up from 7.65% as of Mar 31, 2018.
Return on average assets was 1.44% in the reported quarter compared with the year-ago quarter’s 1.20%. As of Mar 31, 2019, return on average common stockholders' equity came in at 14.01%, up from 12.15% as of Mar 31, 2018.
Our Viewpoint
Stellar revenue growth, along with the strong loan and deposit balance, highlights Webster Financial’s decent performance in the Jan-Mar quarter. Further, the company’s capital position remained strong. Nonetheless, escalating expenses might partially impede its bottom-line growth.
Webster Financial currently 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
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of 19.4% in first-quarter 2019. Earnings per share of $1.60 comfortably surpassed the Zacks Consensus Estimate of $1.34. Further, the bottom line compared favorably with the prior-year quarter figure of $1.38.
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter operating earnings per share of $1 outpaced the Zacks Consensus Estimate of 98 cents. The reported figure also came in 11.1% higher than the year-ago reported tally.
BancorpSouth delivered first-quarter 2019 net operating earnings of 56 cents per share, beating the Zacks Consensus Estimate of 54 cents. Also, the bottom line increased 3.7% from the prior-year quarter’s reported figure.
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Webster Financial (WBS - Free Report) reported a positive earnings surprise of 5% in first-quarter 2019. Adjusted earnings per share of $1.06 surpassed the Zacks Consensus Estimate of $1.01. Also, the bottom line increased 24.7% from the prior-year quarter.
Results reflect growth in revenues, with support from higher loans and deposits, along with improving interest margin. Also, lower provisions and the company’s strong capital position were a tailwind. However, investors’ disappointment was visible on rising expenses and lower fee income which led its share price to decline 2.6%, following the release.
After considering several non-recurring items, the company reported earnings applicable to common shareholders of $97.5 million or $1.06 per share, significantly up from $78.1 million or 85 cents in the prior-year quarter.
Revenue Growth Mitigates Higher Expenses, Loans Increase
Webster Financial’s total revenues in the first quarter increased 9.6%, year over year, to $310.2 million. The top-line figure came in line with the Zacks Consensus Estimate.
Net interest income grew 12.8% year over year to $241.6 million. Moreover, net interest margin expanded 30 basis points (bps) to 3.74%.
Non-interest income was around $68.6 million, slightly down year over year. The downside primarily resulted from a fall in income from wealth and investment services, mortgage banking activities and other income.
Non-interest expenses of $175.7 million escalated 2.4% from the year-ago quarter. This upswing mainly resulted from higher compensation and benefits expenses, technology and equipment, along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio (on a non-GAAP basis) came in at 55.93% compared with 59.76% as of Mar 31, 2018. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Mar 31, 2019 were $18.81 billion, up 1.9% sequentially. Further, total deposits increased 4.1% from the previous quarter to $22.8 billion.
Credit Quality: A Mixed Bag
Total non-performing assets were $164.4 million, up 17.4% from the year-ago quarter. In addition, the ratio of net charge-offs to annualized average loans came in at 0.21%, up 8 bps year over year.
However, allowance for loan losses represented 1.12% of total loans as of Mar 31, 2019, down 3 bps from Mar 31, 2018. Also, the provision for loan and lease losses slipped 21.8% to $8.6 million.
Improved Capital & Profitability Ratios
As of Mar 31, 2019, Tier 1 risk-based capital ratio was 12.17% compared with 11.75% as of Mar 31, 2018. Additionally, total risk-based capital ratio came in at 13.60% compared with 13.24% in the prior-year quarter. Tangible common equity ratio was 8.16%, up from 7.65% as of Mar 31, 2018.
Return on average assets was 1.44% in the reported quarter compared with the year-ago quarter’s 1.20%. As of Mar 31, 2019, return on average common stockholders' equity came in at 14.01%, up from 12.15% as of Mar 31, 2018.
Our Viewpoint
Stellar revenue growth, along with the strong loan and deposit balance, highlights Webster Financial’s decent performance in the Jan-Mar quarter. Further, the company’s capital position remained strong. Nonetheless, escalating expenses might partially impede its bottom-line growth.
Webster Financial currently 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
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of 19.4% in first-quarter 2019. Earnings per share of $1.60 comfortably surpassed the Zacks Consensus Estimate of $1.34. Further, the bottom line compared favorably with the prior-year quarter figure of $1.38.
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter operating earnings per share of $1 outpaced the Zacks Consensus Estimate of 98 cents. The reported figure also came in 11.1% higher than the year-ago reported tally.
BancorpSouth delivered first-quarter 2019 net operating earnings of 56 cents per share, beating the Zacks Consensus Estimate of 54 cents. Also, the bottom line increased 3.7% from the prior-year quarter’s reported figure.
Is Your Investment Advisor Fumbling Your Financial Future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”
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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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