At the KBW Virtual Southeast Bank Conference, Hancock Whitney Corporation (HWC - Free Report) stated that it expects loan growth in second-quarter 2020 to be aided by Paycheck Protection Program (“PPP”) loan funding. However, growth in PPP loans will likely be partially offset by the lack of demand for overall loans along with pay downs of lines of credit.
Pay downs are expected in the second quarter because in first-quarter 2020, clients drew on credit lines, owing to the heightened fear and the subsequent lockdown caused by the coronavirus outbreak.
Notably, as of May 31, 2020, Hancock Whitney originated more than 12,000 PPP loans worth $2.3 billion. Based on the current loan forgiveness expectations, the company expects gross fees of nearly $73 million.
The effective yield on PPP loans is projected to be 4%.
The Paycheck Protection Program was designed to support small business owners, who were facing the risk of shutting down due to the economic fallout. However, recently, a House panel responsible for overseeing the coronavirus pandemic response accused several banks to have preferred larger, well-funded companies over the smaller ones from rural or minority communities, while approving loans under PPP.
Hence, an investigation is being conducted on several big banks, including JPMorgan Chase (JPM - Free Report) , Wells Fargo (WFC - Free Report) , Citigroup (C - Free Report) and few others regarding their role in the PPP.
At the conference, Hancock Whitney also said that it expects more than half of its deferrals outstanding as of May 31, 2020, to roll off in the next few weeks as when the lockdown began many customers became very cautious and reacted accordingly.
While some customers might need an extension in deferrals, others will likely require a structured solution or workout plan.
Notably, in the first quarter, almost all companies built significant reserves in order to cope with the virus outbreak-induced uncertainty. Hancock Whitney witnessed a substantial increase in provision for credit losses in first-quarter 2020. It recorded provisions of $246.8 million, up from $18 million recorded in the year-ago quarter. Also, the company’s allowance for credit losses totaled $475 million.
While it expects to continue to build allowance for credit losses in the second quarter as well, the amount will likely be less than that in the previous quarter.
Although the lockdown is getting lifted in most places and businesses are getting resumed, higher reserves will likely negatively impact banks’ profitability to some extent in the near term.
Our Take
For Hancock Whitney, near-zero interest rates are expected to hurt its net interest margin in the near term. Moreover elevated expenses mainly due to technology enhancement efforts will likely hamper the bottom line to an extent.
Shares of the company have lost 47.5% so far this year compared with a decline of 32% recorded by the industry.
Currently, Hancock Whitney carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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 >>
At the KBW Virtual Southeast Bank Conference, Hancock Whitney Corporation (HWC - Free Report) stated that it expects loan growth in second-quarter 2020 to be aided by Paycheck Protection Program (“PPP”) loan funding. However, growth in PPP loans will likely be partially offset by the lack of demand for overall loans along with pay downs of lines of credit.
Pay downs are expected in the second quarter because in first-quarter 2020, clients drew on credit lines, owing to the heightened fear and the subsequent lockdown caused by the coronavirus outbreak.
Notably, as of May 31, 2020, Hancock Whitney originated more than 12,000 PPP loans worth $2.3 billion. Based on the current loan forgiveness expectations, the company expects gross fees of nearly $73 million.
The effective yield on PPP loans is projected to be 4%.
The Paycheck Protection Program was designed to support small business owners, who were facing the risk of shutting down due to the economic fallout. However, recently, a House panel responsible for overseeing the coronavirus pandemic response accused several banks to have preferred larger, well-funded companies over the smaller ones from rural or minority communities, while approving loans under PPP.
Hence, an investigation is being conducted on several big banks, including JPMorgan Chase (JPM - Free Report) , Wells Fargo (WFC - Free Report) , Citigroup (C - Free Report) and few others regarding their role in the PPP.
At the conference, Hancock Whitney also said that it expects more than half of its deferrals outstanding as of May 31, 2020, to roll off in the next few weeks as when the lockdown began many customers became very cautious and reacted accordingly.
While some customers might need an extension in deferrals, others will likely require a structured solution or workout plan.
Notably, in the first quarter, almost all companies built significant reserves in order to cope with the virus outbreak-induced uncertainty. Hancock Whitney witnessed a substantial increase in provision for credit losses in first-quarter 2020. It recorded provisions of $246.8 million, up from $18 million recorded in the year-ago quarter. Also, the company’s allowance for credit losses totaled $475 million.
While it expects to continue to build allowance for credit losses in the second quarter as well, the amount will likely be less than that in the previous quarter.
Although the lockdown is getting lifted in most places and businesses are getting resumed, higher reserves will likely negatively impact banks’ profitability to some extent in the near term.
Our Take
For Hancock Whitney, near-zero interest rates are expected to hurt its net interest margin in the near term. Moreover elevated expenses mainly due to technology enhancement efforts will likely hamper the bottom line to an extent.
Shares of the company have lost 47.5% so far this year compared with a decline of 32% recorded by the industry.
Currently, Hancock Whitney carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
Click Here, See It Free >>
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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