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Hilltop Holdings Inc.’s (HTH - Free Report) fourth-quarter 2022 earnings of 39 cents per share easily outpaced the Zacks Consensus Estimate of 26 cents. However, the bottom line plunged 50% from the prior-year quarter. Our estimate for earnings was 27 cents.
Results primarily benefited from higher rates and rising loan balance, which led to an increase in the net interest income. Also, lower expenses acted as a tailwind. However, lower non-interest income mainly due to the weak mortgage business was an undermining factor. In the reported quarter, the company recorded a provision for credit losses against a reversal in the year-ago quarter, which was also a negative.
Net income attributable to Hilltop Holdings was $25.6 million, down 58.9% year over year. Our estimate for the metric was $17.4 million.
Earnings of $1.60 per share for 2022 outpaced the Zacks Consensus Estimate of $1.50. However, the bottom line plunged 65.3% from the prior-year period. Our estimate for earnings was also $1.50. Net income attributable to Hilltop Holdings was $113.1 million, down 69.8% year over year.
Revenues & Expenses Decline
Quarterly net revenues were $293.2 million, declining 24.6% year over year. The top line missed the Zacks Consensus Estimate of $301.5 million. Our estimate for revenues was $303.4 million.
Revenues for 2022 were $1.29 billion, declining 29.6% year over year. The top line marginally lagged the Zacks Consensus Estimate of $1.30 billion. We also projected revenues of $1.30 billion.
Quarterly net interest income grew 18.4% year over year to $123.4 million. Our estimate was $121.9 million. The net interest margin (taxable-equivalent basis) was 3.24%, expanding 79 basis points (bps) year over year.
Non-interest income was $169.8 million, plunging 40.4% year over year. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income. Our estimate for the metric was $181.5 million.
Non-interest expenses fell 21.4% year over year to $253.4 million. The decline was due to a fall in almost all expense components, except for costs related to professional services. We had projected expenses of $274.3 million.
As of Dec 31, 2022, net loans held for investment were $8 billion, up 1.8% from the end of the prior quarter. Total deposits were $11.32 billion, down marginally sequentially.
Credit Quality: Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $3.6 million against a reversal of $18.6 million in the prior-year quarter. We had projected provisions of $4.2 million. As of Dec 31, 2022, non-performing assets as a percentage of total assets were 0.20%, down from 0.29% in the prior-year quarter.
Profitability & Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.63%, down from the prior-year quarter’s 1.41%. The return on average equity was 4.99%, down from 9.93%.
Common equity tier 1 capital ratio was 18.22% as of Dec 31, 2022, down from 21.22% in the corresponding period of 2021. The total capital ratio was 20.97%, reflecting a fall from the year-ago period’s 23.75%.
Capital Deployment Update
Concurrent with the earnings release, the company announced a quarterly cash dividend of 16 cents per share, representing a hike of 7% from the prior payout. The dividend will be paid out on Feb 24 to shareholders of record as of Feb 10.
Also, HTH’s board of directors approved a new stock repurchase program through January 2024, under which the company may repurchase up to $75 million of its outstanding common stock.
Notably, in 2022, HTH repurchased $442.3 million worth of shares at $29.75 per share pursuant to the tender offer completed in May. The shares were returned to the pool of authorized but unissued shares of common stock.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, because of the company’s continued investments in franchise, expenses are anticipated to increase in the near term, hurting profits to an extent.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income, driven by higher rates, acted as a tailwind for NTRS.
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Hilltop Holdings (HTH) Q4 Earnings Beat, Revenues Decline Y/Y
Hilltop Holdings Inc.’s (HTH - Free Report) fourth-quarter 2022 earnings of 39 cents per share easily outpaced the Zacks Consensus Estimate of 26 cents. However, the bottom line plunged 50% from the prior-year quarter. Our estimate for earnings was 27 cents.
Results primarily benefited from higher rates and rising loan balance, which led to an increase in the net interest income. Also, lower expenses acted as a tailwind. However, lower non-interest income mainly due to the weak mortgage business was an undermining factor. In the reported quarter, the company recorded a provision for credit losses against a reversal in the year-ago quarter, which was also a negative.
Net income attributable to Hilltop Holdings was $25.6 million, down 58.9% year over year. Our estimate for the metric was $17.4 million.
Earnings of $1.60 per share for 2022 outpaced the Zacks Consensus Estimate of $1.50. However, the bottom line plunged 65.3% from the prior-year period. Our estimate for earnings was also $1.50. Net income attributable to Hilltop Holdings was $113.1 million, down 69.8% year over year.
Revenues & Expenses Decline
Quarterly net revenues were $293.2 million, declining 24.6% year over year. The top line missed the Zacks Consensus Estimate of $301.5 million. Our estimate for revenues was $303.4 million.
Revenues for 2022 were $1.29 billion, declining 29.6% year over year. The top line marginally lagged the Zacks Consensus Estimate of $1.30 billion. We also projected revenues of $1.30 billion.
Quarterly net interest income grew 18.4% year over year to $123.4 million. Our estimate was $121.9 million. The net interest margin (taxable-equivalent basis) was 3.24%, expanding 79 basis points (bps) year over year.
Non-interest income was $169.8 million, plunging 40.4% year over year. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income. Our estimate for the metric was $181.5 million.
Non-interest expenses fell 21.4% year over year to $253.4 million. The decline was due to a fall in almost all expense components, except for costs related to professional services. We had projected expenses of $274.3 million.
As of Dec 31, 2022, net loans held for investment were $8 billion, up 1.8% from the end of the prior quarter. Total deposits were $11.32 billion, down marginally sequentially.
Credit Quality: Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $3.6 million against a reversal of $18.6 million in the prior-year quarter. We had projected provisions of $4.2 million. As of Dec 31, 2022, non-performing assets as a percentage of total assets were 0.20%, down from 0.29% in the prior-year quarter.
Profitability & Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.63%, down from the prior-year quarter’s 1.41%. The return on average equity was 4.99%, down from 9.93%.
Common equity tier 1 capital ratio was 18.22% as of Dec 31, 2022, down from 21.22% in the corresponding period of 2021. The total capital ratio was 20.97%, reflecting a fall from the year-ago period’s 23.75%.
Capital Deployment Update
Concurrent with the earnings release, the company announced a quarterly cash dividend of 16 cents per share, representing a hike of 7% from the prior payout. The dividend will be paid out on Feb 24 to shareholders of record as of Feb 10.
Also, HTH’s board of directors approved a new stock repurchase program through January 2024, under which the company may repurchase up to $75 million of its outstanding common stock.
Notably, in 2022, HTH repurchased $442.3 million worth of shares at $29.75 per share pursuant to the tender offer completed in May. The shares were returned to the pool of authorized but unissued shares of common stock.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, because of the company’s continued investments in franchise, expenses are anticipated to increase in the near term, hurting profits to an extent.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Hilltop Holdings Inc. price-consensus-eps-surprise-chart | Hilltop Holdings Inc. Quote
Hilltop Holdings 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
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income, driven by higher rates, acted as a tailwind for NTRS.