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Webster Financial (WBS) Up on Q1 Earnings Beat, Costs Rise
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Shares of Webster Financial Corporation (WBS - Free Report) rose nearly 1.4% following its first quarter earnings release on Friday, before the opening bell. The company reported earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. This was also up from 49 cents earned in the prior-year quarter.
Results benefited from top-line growth, partially offset by higher non-interest expenses. While loan and deposit balances showed continued improvement, nonperforming assets showed deterioration and credit quality remained mixed.
Net income available to shareholders came in at $57.3 million, up 27.7% year over year.
Revenue Growth Offsets Higher Expenses
Webster Financial’s total revenue rose 7.3% from the prior-year quarter to $255.7 million. Revenues marginally beat the Zacks Consensus Estimate of $255 million.
Net interest income grew 9.4% year over year to $192.7 million. The rise was mainly attributable to higher interest income and lower interest expenses. Moreover, net interest margin increased 11 basis points (bps) from the year-ago quarter to 3.22%.
Non-interest income was roughly $63 million, up 1.1% year over year. The growth was primarily prompted by a rise in deposit service fees, loan and lease related fees and wealth and investment services fee. These were, however, partially offset by no gain on investment securities, cash surrender value of life insurance policies, mortgage banking activities and other income.
Non-interest expense of $163.8 million climbed 7.4% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, occupancy expenses, technology and equipment, marketing costs and professional and outside services costs. The increase was partially offset by a fall in intangible assets amortization, loan workout expenses, deposit insurance costs and other expenses.
The company’s total loans and leases as of Mar 31, 2017 were $17.1 billion, up 0.4% sequentially. The rise was mainly attributable to an increase in commercial, commercial real estate and residential mortgage loans. However, the rise was partially offset by a fall in consumer loans. Further total deposits rose 4.9% from the prior month to $20.2 billion.
Credit Quality: A Mixed Bag
The ratio of net charge-offs to annualized average loans came in at 0.13%, down 28 basis points (bps) from the prior-year quarter.
However, total nonperforming assets were $177.9 million, up 22.1% from the year-ago quarter. Further, the ratio of nonperforming loans and leases to total loans and leases rose 13 bps year over year to 1.02%.
The provision for loan and lease losses fell 32.7% from the year-ago quarter to $10.5 million.
Strong Balance Sheet, Improved Profitability & Capital Ratios
As of Mar 31, 2017, Tier 1 risk-based capital ratio was 11.40% compared with 11.33% as of Mar 31, 2016.
Total risk-based capital ratio came in at 12.93%, increasing marginally from 12.8% in the prior-year quarter. Tangible common equity ratio was 7.34%, up from 7.13% as of Mar 31, 2016.
The return on average assets was 0.91% in the reported quarter compared with 0.76% in the prior-year quarter. As of Mar 31, 2017, return on average stockholders' equity came in at 9.43%, up from 7.80% as of Mar 31, 2016.
Our Take
Economic recovery and better interest rate scenario are anticipated to help the company witness better margins in the quarters ahead. Moreover, a rise in both deposits and loans indicates Webster Financial’s capacity for organic growth. Furthermore, the company’s strong capital position will likely bolster its financials in the quarters ahead.
Webster Financial Corporation Price, Consensus and EPS Surprise
Among other banks, First Commonwealth Financial Corporation (FCF - Free Report) and Sterling Bancorp are slated to announce their first-quarter earnings on Apr 25 while Boston Private Financial Holdings, Inc. will announce its first-quarter results on Apr 26.
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Webster Financial (WBS) Up on Q1 Earnings Beat, Costs Rise
Shares of Webster Financial Corporation (WBS - Free Report) rose nearly 1.4% following its first quarter earnings release on Friday, before the opening bell. The company reported earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. This was also up from 49 cents earned in the prior-year quarter.
Results benefited from top-line growth, partially offset by higher non-interest expenses. While loan and deposit balances showed continued improvement, nonperforming assets showed deterioration and credit quality remained mixed.
Net income available to shareholders came in at $57.3 million, up 27.7% year over year.
Revenue Growth Offsets Higher Expenses
Webster Financial’s total revenue rose 7.3% from the prior-year quarter to $255.7 million. Revenues marginally beat the Zacks Consensus Estimate of $255 million.
Net interest income grew 9.4% year over year to $192.7 million. The rise was mainly attributable to higher interest income and lower interest expenses. Moreover, net interest margin increased 11 basis points (bps) from the year-ago quarter to 3.22%.
Non-interest income was roughly $63 million, up 1.1% year over year. The growth was primarily prompted by a rise in deposit service fees, loan and lease related fees and wealth and investment services fee. These were, however, partially offset by no gain on investment securities, cash surrender value of life insurance policies, mortgage banking activities and other income.
Non-interest expense of $163.8 million climbed 7.4% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, occupancy expenses, technology and equipment, marketing costs and professional and outside services costs. The increase was partially offset by a fall in intangible assets amortization, loan workout expenses, deposit insurance costs and other expenses.
The company’s total loans and leases as of Mar 31, 2017 were $17.1 billion, up 0.4% sequentially. The rise was mainly attributable to an increase in commercial, commercial real estate and residential mortgage loans. However, the rise was partially offset by a fall in consumer loans. Further total deposits rose 4.9% from the prior month to $20.2 billion.
Credit Quality: A Mixed Bag
The ratio of net charge-offs to annualized average loans came in at 0.13%, down 28 basis points (bps) from the prior-year quarter.
However, total nonperforming assets were $177.9 million, up 22.1% from the year-ago quarter. Further, the ratio of nonperforming loans and leases to total loans and leases rose 13 bps year over year to 1.02%.
The provision for loan and lease losses fell 32.7% from the year-ago quarter to $10.5 million.
Strong Balance Sheet, Improved Profitability & Capital Ratios
As of Mar 31, 2017, Tier 1 risk-based capital ratio was 11.40% compared with 11.33% as of Mar 31, 2016.
Total risk-based capital ratio came in at 12.93%, increasing marginally from 12.8% in the prior-year quarter. Tangible common equity ratio was 7.34%, up from 7.13% as of Mar 31, 2016.
The return on average assets was 0.91% in the reported quarter compared with 0.76% in the prior-year quarter. As of Mar 31, 2017, return on average stockholders' equity came in at 9.43%, up from 7.80% as of Mar 31, 2016.
Our Take
Economic recovery and better interest rate scenario are anticipated to help the company witness better margins in the quarters ahead. Moreover, a rise in both deposits and loans indicates Webster Financial’s capacity for organic growth. Furthermore, the company’s strong capital position will likely bolster its financials in the quarters ahead.
Webster Financial Corporation Price, Consensus and EPS Surprise
Webster Financial Corporation Price, Consensus and EPS Surprise | Webster Financial Corporation Quote
At present, Webster Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other banks, First Commonwealth Financial Corporation (FCF - Free Report) and Sterling Bancorp are slated to announce their first-quarter earnings on Apr 25 while Boston Private Financial Holdings, Inc. will announce its first-quarter results on Apr 26.
“More Stock News: This Is Bigger than the iPhone!”
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>