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UMB Financial (UMBF) Hurt by Rising Costs and Competition

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UMB Financial (UMBF - Free Report) is expected to witness a persistent rise in operating expenses. Also, growing competition and high exposure to risky loan portfolios are major headwinds.

Cost escalation is the key downside for UMB Financial. The company has been witnessing a rise in non-interest expenses over the past several years. The rising trend continued in first-quarter 2023 as well.

Also, UMBF expects the acquisition of health savings account (HSA) deposits to add around $4.5 million of amortization expenses in 2023. It expects operating expenses for the second quarter of 2023 to be approximately $227 million. These are expected to weigh on the bank’s bottom line.

Going forward, growing market share of FinTech companies and online service providers remains a key threat to traditional banks like UMBF. It has been facing intense competition in its business operations in recent times from such companies.

Apart from rising costs and growing competition, UMBF faces high exposure to commercial loans. This depicts lack of diversification, which can be risky amid worsening economic outlook and recessionary fears.

Analysts also seem pessimistic regarding the company’s growth potential. The Zacks Consensus Estimate for UMBF’s current-year earnings has been revised 6.4% downward over the last 60 days.

The stock currently carries a Zacks Rank #4 (Sell).

Over the past six months, shares of UMB Financial have lost 33.8% compared with the industry's 28.9% decline.


Zacks Investment Research
Image Source: Zacks Investment Research


Despite the above-mentioned concerns, UMBF is well placed to grow organically with solid loan and deposit balances, and diversified fee income. Further, given its decent liquidity position, the bank is expected to continue with efficient capital deployment activities, thus enhancing shareholder value.

Finance Stocks Worth Considering

A couple of better-ranked stocks from the finance sector are Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) and Pathward Financial Inc. (CASH - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for MUFG’s fiscal 2023 earnings has been revised 1.3% upward over the past 60 days. The stock has gained 18.6% over the past six months.

The consensus estimate for CASH’s fiscal 2023 earnings has been revised 1.8% upward over the past 60 days. Over the past six months, the company’s share price has increased 7.1%.

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