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WaFd (WAFD) Q4 Earnings & Revenues Lag, NII Declines Y/Y

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WaFd, Inc.’s (WAFD - Free Report) fourth-quarter fiscal 2023 (ended Sep 30) earnings of 72 cents per share missed the Zacks Consensus Estimate of 91 cents. Moreover, the bottom line declined 32.7% year over year.

Results reflected a fall in net interest income (NII) and other income, thereby hurting the top line. Also, higher provisions on the back of a deteriorating economic outlook acted as a spoilsport. However, a slight decline in other expenses and a marginal rise in loan balance were positives.

Net income available to common shareholders was $46.6 million, down 33.2% from the prior-year quarter. Our estimate for the metric was $58.2 million.

Fiscal 2023 earnings per share of $3.72 climbed 9.7% but lagged the consensus estimate of $3.91. Further, net income available to common shareholders increased 9.5% to $242.8 million.

Revenues & Expenses Down

Net revenues in the quarter were $178.03 million, down 5.4% from the year-ago quarter. Moreover, the top line lagged the Zacks Consensus Estimate of $186.59 million.

Fiscal 2023 net revenues of $742.4 million grew 12.3%. The top line, however, missed the consensus estimate of $755.09 million.

NII came in at $163.7 million, falling 5.7% from the year-ago quarter. The net interest margin (NIM) was 3.13%, contracting 51 basis points (bps). Our estimates for NII and NIM were $173.7 million and 3.39%, respectively.

Total other income of $14.3 million declined 1%. The decrease was mainly due to a substantial decline in loan fee income. Our estimate for total other income was $12.9 million.

Total other expenses amounted to $92.2 million, down 1% from the year-ago quarter. Lower compensation and benefits, and other expenses more than offset the rise in FDIC insurance premiums, product delivery and information technology costs, leading to the overall decline. Our estimate for total other expenses was $102.9 million.

The company’s efficiency ratio was 51.78%, up from 49.52% a year ago. A rise in the efficiency ratio reflects lower profitability.

As of Sep 30, 2023, net loans receivable amounted to $17.48 billion, up marginally from the prior quarter's end. Total customer deposits were $16.07 billion, slightly lower than the previous quarter.

At the end of the fiscal fourth quarter, the return on average common equity was 8.73%, down from 14.22% at the end of the prior-year quarter. Return on average assets was 0.90%, down from 1.44% at the end of the prior-year quarter.

Credit Quality Worsens

As of Sep 30, the allowance for credit losses (including reserve for unfunded commitments) was 1.03% of gross loans outstanding, down 3 bps from the prior quarter end. Also, the ratio of non-performing assets to total assets was 0.26%, up 5 bps.

In the reported quarter, the provision for credit losses was $26.5 million, substantially higher than $1.5 million at the previous quarter's end.

Share Repurchase Update

During the quarter, WAFD repurchased 428 shares at an average price of $30.41 per share.

Our Viewpoint

Decent loan growth, higher interest rates and a robust balance sheet will likely continue aiding WAFD’s financials. The company’s plan to foray into California by acquiring Luther Burbank will be accretive to earnings going forward.

However, elevated expenses and a worsening economic backdrop are major near-term headwinds.

WaFd, Inc. Price, Consensus and EPS Surprise

WaFd, Inc. Price, Consensus and EPS Surprise

WaFd, Inc. price-consensus-eps-surprise-chart | WaFd, Inc. Quote

Currently, WAFD carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Banks

East West Bancorp (EWBC - Free Report) is scheduled to release its third-quarter 2023 numbers on Oct 19.

Over the past seven days, the Zacks Consensus Estimate for EWBC’s quarterly earnings has moved marginally down to $2.01 per share. The figure implies a 3.4% decrease from the prior-year quarter.

Bank of Hawaii (BOH - Free Report) is slated to announce its third-quarter 2023 results on Oct 23.

Over the past 30 days, the Zacks Consensus Estimate for BOH’s quarterly earnings has moved 1.1% upward to 96 cents per share. The estimate indicates a 25% decrease from the prior-year quarter.

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