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Webster Financial (WBS) Gains 8.2% Despite Q4 Earnings Miss
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Webster Financial (WBS - Free Report) reported fourth-quarter 2022 adjusted earnings per share of $1.60, which missed the Zacks Consensus Estimate of $1.66. The reported figure excluded items such as charges related to merger and strategic optimization.
A rise in expenses and higher provisions affected Webster's results.
However, higher net interest income (NII) and fee income on the back of Sterling Bancorp’s acquisition offered some support. Also, growth in loan balance acted as a tailwind. These turned the investors bullish on the stock, as the share price surged 8.2% following the quarterly release.
WBS reported net income applicable to common shareholders of $240.6 million, up from the prior-year quarter’s $109.1 million.
In 2022, Webster Financial reported a net income of $644.3 million or $3.72 per share compared with $408.9 million or $4.42 per share in 2021.
Revenues & Expenses Increase, Loans Improve
WBS’ total revenues in the quarter increased substantially year over year to $704.6 million. The rise was majorly due to higher NII supported by higher rates and acquisition of Sterling Bancorp in January 2022. Moreover, the top line surpassed the Zacks Consensus Estimate of $702 million.
In 2022, total revenues were up substantially to $2.47 billion. However, the top line missed the Zacks Consensus Estimate of $2.48 billion.
NII increased substantially year over year to $602.4 million. Additionally, net interest margin expanded 101 basis points (bps) to 3.74%.
Non-interest income was $102.2 million, up 13.4% year over year. This rise mainly resulted from deposit service fees, loan and lease related fee and increase in cash surrender value of life insurance policies.
Non-interest expenses of $348.4 million increased substantially. Excluding debt pre-payment charges, merger and strategic initiative-related charges, this increase chiefly resulted from increase in all components of non-interest expenses.
Efficiency ratio (on a non-GAAP basis) came in at 40.27% compared with 54.85% as of Dec 31, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Dec 31, 2022 were $49.8 billion, up 4.1%, sequentially. Also, total deposits were up marginally to $54.1 billion.
Credit Quality – Mixed Bag
Total non-performing assets were $206.1 million as of Dec 31, 2022, up 83.1% from the year-ago quarter’s level. In addition, allowance for loan losses represented 1.2% of total loans, having shrunk 15 bps from the level as of Dec 31, 2021.
A provision for credit losses of $43 million was recorded against a benefit of $15 million seen in the prior-year quarter. The ratio of net charge-offs to annualized average loans came in at 0.17% compared with recoveries of 0.02% reported in the year-ago quarter.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2022, Tier 1 risk-based capital ratio was 11.23% compared with 12.32% as of Dec 31, 2021. Additionally, total risk-based capital ratio was 13.25% compared with the prior-year quarter’s 13.64%.
Return on average assets was 1.40% in the reported quarter compared with the year-earlier quarter’s 1.26%. As of Dec 31, 2022, return on average common stockholders' equity was 12.54%, down from 13.35%. Moreover, tangible common equity ratio was 7.38%, down from 7.97%.
Our Viewpoint
The company’s results reflect strong growth in NII and fee income backed by higher rates and acquisition of Sterling Bancorp in January 2022. The strong profitability ratio was another positive factor. However, higher expenses and provisions are concerning.
Webster Financial Corporation Price, Consensus and EPS Surprise
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 and declined 14% year over year.
Results of NTRS were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in NII driven by higher rates acted as a tailwind.
Citizens Financial Group (CFG - Free Report) reported fourth-quarter 2022 underlying earnings per share of $1.32, which surpassed the Zacks Consensus Estimate of $1.30. However, the bottom line rose from $1.26 in the year-ago quarter.
Results of CFG reflect NII growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.
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Webster Financial (WBS) Gains 8.2% Despite Q4 Earnings Miss
Webster Financial (WBS - Free Report) reported fourth-quarter 2022 adjusted earnings per share of $1.60, which missed the Zacks Consensus Estimate of $1.66. The reported figure excluded items such as charges related to merger and strategic optimization.
A rise in expenses and higher provisions affected Webster's results.
However, higher net interest income (NII) and fee income on the back of Sterling Bancorp’s acquisition offered some support. Also, growth in loan balance acted as a tailwind. These turned the investors bullish on the stock, as the share price surged 8.2% following the quarterly release.
WBS reported net income applicable to common shareholders of $240.6 million, up from the prior-year quarter’s $109.1 million.
In 2022, Webster Financial reported a net income of $644.3 million or $3.72 per share compared with $408.9 million or $4.42 per share in 2021.
Revenues & Expenses Increase, Loans Improve
WBS’ total revenues in the quarter increased substantially year over year to $704.6 million. The rise was majorly due to higher NII supported by higher rates and acquisition of Sterling Bancorp in January 2022. Moreover, the top line surpassed the Zacks Consensus Estimate of $702 million.
In 2022, total revenues were up substantially to $2.47 billion. However, the top line missed the Zacks Consensus Estimate of $2.48 billion.
NII increased substantially year over year to $602.4 million. Additionally, net interest margin expanded 101 basis points (bps) to 3.74%.
Non-interest income was $102.2 million, up 13.4% year over year. This rise mainly resulted from deposit service fees, loan and lease related fee and increase in cash surrender value of life insurance policies.
Non-interest expenses of $348.4 million increased substantially. Excluding debt pre-payment charges, merger and strategic initiative-related charges, this increase chiefly resulted from increase in all components of non-interest expenses.
Efficiency ratio (on a non-GAAP basis) came in at 40.27% compared with 54.85% as of Dec 31, 2021. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Dec 31, 2022 were $49.8 billion, up 4.1%, sequentially. Also, total deposits were up marginally to $54.1 billion.
Credit Quality – Mixed Bag
Total non-performing assets were $206.1 million as of Dec 31, 2022, up 83.1% from the year-ago quarter’s level. In addition, allowance for loan losses represented 1.2% of total loans, having shrunk 15 bps from the level as of Dec 31, 2021.
A provision for credit losses of $43 million was recorded against a benefit of $15 million seen in the prior-year quarter. The ratio of net charge-offs to annualized average loans came in at 0.17% compared with recoveries of 0.02% reported in the year-ago quarter.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2022, Tier 1 risk-based capital ratio was 11.23% compared with 12.32% as of Dec 31, 2021. Additionally, total risk-based capital ratio was 13.25% compared with the prior-year quarter’s 13.64%.
Return on average assets was 1.40% in the reported quarter compared with the year-earlier quarter’s 1.26%. As of Dec 31, 2022, return on average common stockholders' equity was 12.54%, down from 13.35%. Moreover, tangible common equity ratio was 7.38%, down from 7.97%.
Our Viewpoint
The company’s results reflect strong growth in NII and fee income backed by higher rates and acquisition of Sterling Bancorp in January 2022. The strong profitability ratio was another positive factor. However, higher expenses and provisions are concerning.
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 the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.
Performance of Other Banks
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 and declined 14% year over year.
Results of NTRS were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in NII driven by higher rates acted as a tailwind.
Citizens Financial Group (CFG - Free Report) reported fourth-quarter 2022 underlying earnings per share of $1.32, which surpassed the Zacks Consensus Estimate of $1.30. However, the bottom line rose from $1.26 in the year-ago quarter.
Results of CFG reflect NII growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.