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Webster Financial (WBS) Stock Down Despite Q2 Earnings Beat
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Webster Financial Corporation (WBS - Free Report) reported second-quarter 2022 adjusted earnings per share of $1.29, which surpassed the Zacks Consensus Estimate of $1.24. The reported figure excluded merger-related expenses related to Sterling Bancorp.
The overall performance of the company was driven by the acquisition of Sterling Bancorp. However, high expenses and a huge rise in non-performing assets were the undermining factors. In addition, the share price of Webster Financial declined 1.2% following the release of earnings.
Results prior to first-quarter 2022 reflect only legacy Webster Financial results. WBS reported net income applicable to common shareholders of $178.1 million in the second quarter, up 94% from the prior-year quarter’s $92.1million.
Revenues & Expenses Increase, Total Loans Up
Webster Financial’s total revenues in the quarter climbed 107% year over year to $607.6 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $594.3 million.
The NII increased 120% year over year to $486.67 million. Net interest margin was 3.28%, up 46 basis points (bps).
Total non-interest income was $120.9 million, up 66% year over year. The primary reason for this rise was an increase in loan and lease-related fees and deposit service fees.
Non-interest expenses of $358.2 million jumped 92% from the year-ago quarter’s level. The rise was primarily due to $66.5 million net merger and strategic initiative charges.
The efficiency ratio (on a non-GAAP basis) came in at 45.25%, down from 56.64% as of Jun 30, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Jun 30, 2022, were $45.6 billion, up 6% sequentially. Total deposits were down 2% from the previous quarter’s level to $53.08 billion.
Credit Quality Declined
Total non-performing assets were $250.2 million as of Jun 30, 2022, up 103% from the year-ago quarter’s level. A provision for credit losses of $12.2 million was recorded against a benefit of $21.5 million in the prior-year quarter. The ratio of net charge-offs to annualized average loans and leases was 0.09% against the recoveries of 0.02% from the year-ago quarter’s level.
Nonetheless, allowance for credit losses on loans and leases represented 1.25% of total loans and leases, having shrunk 18 bps from the level as of Jun 30, 2021.
Capital Ratios Mixed, Weak Profitability Ratios
As of Jun 30, 2022, Tier 1 risk-based capital ratio was 11.61% compared with 12.30% as of Jun 30, 2021.
The total risk-based capital ratio was 13.86% compared with the prior-year quarter’s 13.70%.
The return on average assets was 1.10% in the reported quarter compared with the year-earlier quarter’s 1.12%. As of Jun 30, 2022, the return on average common stockholders' equity was 9.09%, down from 11.63 % in the year-earlier quarter.
The tangible common equity(non-GAAP) ratio was 7.68%, down from 7.91% in the year-ago quarter.
Our Viewpoint
The company’s result reflects strong growth in NII and fee income. However, the credit quality declined in the second quarter. In addition, the weak profitability ratio was an offsetting factor.
Webster Financial Corporation Price, Consensus and EPS Surprise
U.S. Bancorp (USB - Free Report) reported second-quarter 2022 earnings per share of $1.09 (excluding merger and integration-related charges of 10 cents), which beat the Zacks Consensus Estimate of 1.07 per share. However, the results do not compare favorably with the prior-year quarter’s figure of $1.28.
Results were supported by an increase in revenues, average loan growth and lower non-performing assets. The U.S. Bancorp’s credit quality was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 have surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
Results have been supported by an increase in NII and non-interest income. The First Republic Bank’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
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Webster Financial (WBS) Stock Down Despite Q2 Earnings Beat
Webster Financial Corporation (WBS - Free Report) reported second-quarter 2022 adjusted earnings per share of $1.29, which surpassed the Zacks Consensus Estimate of $1.24. The reported figure excluded merger-related expenses related to Sterling Bancorp.
The overall performance of the company was driven by the acquisition of Sterling Bancorp. However, high expenses and a huge rise in non-performing assets were the undermining factors. In addition, the share price of Webster Financial declined 1.2% following the release of earnings.
Results prior to first-quarter 2022 reflect only legacy Webster Financial results.
WBS reported net income applicable to common shareholders of $178.1 million in the second quarter, up 94% from the prior-year quarter’s $92.1million.
Revenues & Expenses Increase, Total Loans Up
Webster Financial’s total revenues in the quarter climbed 107% year over year to $607.6 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $594.3 million.
The NII increased 120% year over year to $486.67 million. Net interest margin was 3.28%, up 46 basis points (bps).
Total non-interest income was $120.9 million, up 66% year over year. The primary reason for this rise was an increase in loan and lease-related fees and deposit service fees.
Non-interest expenses of $358.2 million jumped 92% from the year-ago quarter’s level. The rise was primarily due to $66.5 million net merger and strategic initiative charges.
The efficiency ratio (on a non-GAAP basis) came in at 45.25%, down from 56.64% as of Jun 30, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Jun 30, 2022, were $45.6 billion, up 6% sequentially. Total deposits were down 2% from the previous quarter’s level to $53.08 billion.
Credit Quality Declined
Total non-performing assets were $250.2 million as of Jun 30, 2022, up 103% from the year-ago quarter’s level. A provision for credit losses of $12.2 million was recorded against a benefit of $21.5 million in the prior-year quarter. The ratio of net charge-offs to annualized average loans and leases was 0.09% against the recoveries of 0.02% from the year-ago quarter’s level.
Nonetheless, allowance for credit losses on loans and leases represented 1.25% of total loans and leases, having shrunk 18 bps from the level as of Jun 30, 2021.
Capital Ratios Mixed, Weak Profitability Ratios
As of Jun 30, 2022, Tier 1 risk-based capital ratio was 11.61% compared with 12.30% as of Jun 30, 2021.
The total risk-based capital ratio was 13.86% compared with the prior-year quarter’s 13.70%.
The return on average assets was 1.10% in the reported quarter compared with the year-earlier quarter’s 1.12%. As of Jun 30, 2022, the return on average common stockholders' equity was 9.09%, down from 11.63 % in the year-earlier quarter.
The tangible common equity(non-GAAP) ratio was 7.68%, down from 7.91% in the year-ago quarter.
Our Viewpoint
The company’s result reflects strong growth in NII and fee income. However, the credit quality declined in the second quarter. In addition, the weak profitability ratio was an offsetting factor.
Webster Financial Corporation Price, Consensus and EPS Surprise
Webster Financial Corporation price-consensus-eps-surprise-chart | Webster Financial Corporation Quote
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
U.S. Bancorp (USB - Free Report) reported second-quarter 2022 earnings per share of $1.09 (excluding merger and integration-related charges of 10 cents), which beat the Zacks Consensus Estimate of 1.07 per share. However, the results do not compare favorably with the prior-year quarter’s figure of $1.28.
Results were supported by an increase in revenues, average loan growth and lower non-performing assets. The U.S. Bancorp’s credit quality was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 have surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
Results have been supported by an increase in NII and non-interest income. The First Republic Bank’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.