Back to top

Image: Bigstock

Webster (WBS) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

Read MoreHide Full Article

Webster Financial (WBS - Free Report) reported fourth-quarter 2021 adjusted earnings per share of $1.31, which surpassed the Zacks Consensus Estimate of $1.10. The reported figure excluded noteworthy items, such as charges related to merger, strategic optimization and debt prepayment expenses.

Higher net interest income (NII) and fee income drove the results. Moreover, declining costs, growth in loan balances and impressive capital ratios were positives. Also, the reserve release during the quarter was a tailwind. However, lower net interest margin (NIM) and deposit balance were key concerns.

WBS reported earnings applicable to common shareholders of $108.4 million, up from the prior-year quarter’s $57.7 million.

In 2021, Webster Financial reported a net income of $408.9 million or $4.43 per share compared with $220.6 million or $2.35 in 2020.

Revenues Increase, Expenses Decline, Loans Improve

Webster Financial’s total revenues in the quarter climbed 7.9% year over year to $316.92 million. Moreover, the top line topped the Zacks Consensus Estimate of $308.76 million.

In 2021, total revenues were up 4.1% from the prior-year level to $1.22 billion. The top line missed the Zacks Consensus Estimate of $2.26 billion.The NII increased 4.7% year over year to $226.7 million. Additionally, the NIM contracted 100 basis points (bps) to 2.73%.

Non-interest income was $90.1 million, up 17% year over year. This rise mainly resulted from deposit service fees, investment service fees and other income.
Non-interest expenses of $189.9 million dropped 13.5% from the year-ago quarter’s level. Excluding debt prepayment charges, merger and strategic initiative-related charges, this decline chiefly resulted from the benefits of Webster Financial’s strategic initiatives, partially offset by a higher performance-based compensation and medical claims.

Efficiency ratio (on a non-GAAP basis) came in at 54.85% compared with 60.27% as of Dec 31, 2020. A lower ratio indicates higher profitability.

Webster Financial’s total loans and leases as of Dec 31, 2021 were $22.3 billion, up 3.2%, sequentially. However, total deposits were down marginally from the previous quarter’s level to $29.85 billion.

Credit Quality Betters

Total non-performing assets were $112.6 million as of Dec 31, 2021, down 34% from the year-ago quarter’s level. In addition, allowance for loan losses represented 1.35% of total loans, having shrunk 31 bps from the level as of Dec 31, 2020.

A benefit for credit losses of $15 million was recorded compared with $10 million seen in the prior-year quarter. The ratio of net charge-offs to annualized average loans came in at 0.02% compared with the year-ago quarter’s 0.17%.

Capital Ratios and Profitability Ratios Improve

As of Dec 31, 2021, Tier 1 risk-based capital ratio was 12.32% compared with 11.99% as of Dec 31, 2020. Additionally, total risk-based capital ratio was 13.64% compared with the prior-year quarter’s 13.59%.

Return on average assets was 1.26% in the reported quarter compared with the year-earlier quarter’s 0.73%. As of Dec 31, 2021, return on average common stockholders' equity was 13.35%, up from 9.31%. Moreover, tangible common equity ratio was 7.97%, up from 7.9%.

Our Viewpoint

Webster Financial’s performance in the fourth quarter was decent. Given the rise in loan balances, WBS displays a solid liquidity profile. Further, its top line increased on an improving NII and non-interest income. Nonetheless, a shrinking NIM due to low interest rates was a major drag.

Webster Financial currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance and a strong capital position were encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.