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People's United (PBCT) Q1 Earnings Beat Estimates, Costs Down

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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.

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