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Webster Financial (WBS) Dips 4.9% as Q1 Earnings Miss Estimates
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Webster Financials’ (WBS - Free Report) shares lost 4.9% following the release of its lower-than-expected first-quarter 2024 results. Adjusted quarterly earnings per share (EPS) of $1.35 missed Zacks Consensus Estimate of $1.37. This compares unfavorably with earnings of $1.49 per share reported a year ago.
Results were affected by a fall in both net interest income (NII) and deposit balances, along with elevated expenses. However, lower provisions and a rise in loan balances acted as tailwinds.
The results excluded the charges related to the FDIC special assessment and the acquisition of Ametros in January 2024. After considering these charges, net income applicable to common shareholders was $212.2 million, down 2.2% from the prior-year quarter.
Revenues Fall & Expenses Increase
WBS’ total revenues in the quarter dropped marginally year over year to $667.1 million. The top line lagged the Zacks Consensus Estimate of $672.03 million.
NII decreased 4.6% year over year to $567.7 million. The net interest margin was 3.35%, down 31 basis points (bps).
Non-interest income was $99.4 million, up 40.4% year over year. It included a loss from the sale of investment securities and a net gain on the sale of mortgage servicing rights. Excluding this, non-interest income was up 11.4% from the previous year’s quarter to $97.5 million. The increase was primarily due to the addition of Ametros and BOLI events.
Non-interest expenses were $335.9 million, up 1% from the year-ago quarter. The reported figure included a charge of $11.9 million related to FDIC Special assessment and $3.1 million expense related to the merger. Excluding these charges, non-interest expenses would have been $320.9 million, up 5.9% year over year. The increase was a result of the addition of Ametros and higher performance-based incentive accruals.
The efficiency ratio was 45.25% compared with 41.64% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, total loans and leases increased nearly 1% sequentially to $51.1 billion. However, total deposits decreased marginally from the previous quarter to $60.7 billion.
Credit Quality: Mixed Bag
Total non-performing assets were $289.3 million as of Mar 31, 2024, up 55.1% from the year-ago quarter. Allowance for loan losses was 1.26% of the total loans, which increased from 1.21% reported in the first quarter of 2023.
The ratio of net charge-offs to annualized average loans was 0.29%, up 9 bps year over year.
The provision for credit losses was $45.5 million, down 2.7% year over year.
Capital Ratios Improve
As of Mar 31, 2024, the Tier 1 risk-based capital ratio was 11.01%, which rose from 10.93% as of Mar 31, 2023. The total risk-based capital ratio was 13.13%, which increased from the prior-year quarter’s 12.99%.
Profitability Ratios Worsen
Return on average assets was 1.15%, which declined from 1.22% reported in the prior-year quarter. At the end of the first quarter, the return on average common stockholders' equity was 10.01%, which declined from 10.94% in the prior-year quarter.
Our Viewpoint
Webster Financial finds support from an increase in non-interest income accompanied by reduced provisions for credit losses. Further, the company’s inorganic expansion efforts continue to support financials. However, lower NII, non-interest income and elevated expenses remain major concerns.
Webster Financial Corporation Price, Consensus and EPS Surprise
Texas Capital Bancshares, Inc. (TCBI - Free Report) reported first-quarter 2024 EPS of 62 cents (excluding non-recurring items), which beat the Zacks Consensus Estimate of 59 cents. However, earnings compared unfavorably with 70 cents reported in the year-ago quarter.
TCBI's results benefitted from an increase in non-interest income and higher loan and deposit balances. Additionally, strong capital position and lower provisions were other positives. However, a decline in NII and an increase in expenses were the undermining factors.
Citizens Financial Group (CFG - Free Report) reported first-quarter 2024 EPS of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 reported in the year-ago quarter.
Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.
CFG’s results were adversely affected by lower NII and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
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Webster Financial (WBS) Dips 4.9% as Q1 Earnings Miss Estimates
Webster Financials’ (WBS - Free Report) shares lost 4.9% following the release of its lower-than-expected first-quarter 2024 results. Adjusted quarterly earnings per share (EPS) of $1.35 missed Zacks Consensus Estimate of $1.37. This compares unfavorably with earnings of $1.49 per share reported a year ago.
Results were affected by a fall in both net interest income (NII) and deposit balances, along with elevated expenses. However, lower provisions and a rise in loan balances acted as tailwinds.
The results excluded the charges related to the FDIC special assessment and the acquisition of Ametros in January 2024. After considering these charges, net income applicable to common shareholders was $212.2 million, down 2.2% from the prior-year quarter.
Revenues Fall & Expenses Increase
WBS’ total revenues in the quarter dropped marginally year over year to $667.1 million. The top line lagged the Zacks Consensus Estimate of $672.03 million.
NII decreased 4.6% year over year to $567.7 million. The net interest margin was 3.35%, down 31 basis points (bps).
Non-interest income was $99.4 million, up 40.4% year over year. It included a loss from the sale of investment securities and a net gain on the sale of mortgage servicing rights. Excluding this, non-interest income was up 11.4% from the previous year’s quarter to $97.5 million. The increase was primarily due to the addition of Ametros and BOLI events.
Non-interest expenses were $335.9 million, up 1% from the year-ago quarter. The reported figure included a charge of $11.9 million related to FDIC Special assessment and $3.1 million expense related to the merger. Excluding these charges, non-interest expenses would have been $320.9 million, up 5.9% year over year. The increase was a result of the addition of Ametros and higher performance-based incentive accruals.
The efficiency ratio was 45.25% compared with 41.64% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, total loans and leases increased nearly 1% sequentially to $51.1 billion. However, total deposits decreased marginally from the previous quarter to $60.7 billion.
Credit Quality: Mixed Bag
Total non-performing assets were $289.3 million as of Mar 31, 2024, up 55.1% from the year-ago quarter. Allowance for loan losses was 1.26% of the total loans, which increased from 1.21% reported in the first quarter of 2023.
The ratio of net charge-offs to annualized average loans was 0.29%, up 9 bps year over year.
The provision for credit losses was $45.5 million, down 2.7% year over year.
Capital Ratios Improve
As of Mar 31, 2024, the Tier 1 risk-based capital ratio was 11.01%, which rose from 10.93% as of Mar 31, 2023. The total risk-based capital ratio was 13.13%, which increased from the prior-year quarter’s 12.99%.
Profitability Ratios Worsen
Return on average assets was 1.15%, which declined from 1.22% reported in the prior-year quarter. At the end of the first quarter, the return on average common stockholders' equity was 10.01%, which declined from 10.94% in the prior-year quarter.
Our Viewpoint
Webster Financial finds support from an increase in non-interest income accompanied by reduced provisions for credit losses. Further, the company’s inorganic expansion efforts continue to support financials. However, lower NII, non-interest income and elevated expenses remain major concerns.
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
Texas Capital Bancshares, Inc. (TCBI - Free Report) reported first-quarter 2024 EPS of 62 cents (excluding non-recurring items), which beat the Zacks Consensus Estimate of 59 cents. However, earnings compared unfavorably with 70 cents reported in the year-ago quarter.
TCBI's results benefitted from an increase in non-interest income and higher loan and deposit balances. Additionally, strong capital position and lower provisions were other positives. However, a decline in NII and an increase in expenses were the undermining factors.
Citizens Financial Group (CFG - Free Report) reported first-quarter 2024 EPS of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 reported in the year-ago quarter.
Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.
CFG’s results were adversely affected by lower NII and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.