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UMB (UMBF) Down 2.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for UMB Financial (UMBF - Free Report) . Shares have lost about 2.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is UMB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

UMB Financial Beats on Q1 Earnings, Costs Up

UMB Financial’s first-quarter 2019 net operating earnings from continuing operations of $1.19 per share surpassed the Zacks Consensus Estimate of $1.10. The reported figure compared unfavorably with the prior-year quarter’s earnings of $1.18.

Results benefited from rise in revenues, partly offset by higher expenses. Moreover, loans and deposit balances remained strong during the quarter. However, an increase in provisions was a headwind for the company.

Including certain non-recurring items, UMB Financial reported net income of $57.7 million or $1.18 per share for the quarter under review, up from $56.8 million or $1.14 per share recorded in the prior-year quarter.

Revenues Improve, Costs Flare Up

Total revenues (non-GAAP) were $270.4 million, up 6.8% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $262.9 million.

Net interest income was $163.9 million, reflecting an increase of 10.8% from the year-ago quarter. Increase in average loans, along with elevated average loan yields, mainly led to this upside. Net interest margin (NIM) expanded 1 basis point (bp) from the prior-year quarter to 3.20%.

Non-interest income totaled $107.4 million, up 1.8% year over year. The upside was driven by an improvement in most of the income components, except for trust and securities processing fees, service charges on deposit accounts, and bankcard fees.

Non-interest expenses (GAAP basis) were $190.6 million, up 8.4% from the year-ago figure. This rise was due to an increase in almost all expense components, except for marketing and business development costs, bankcard related expenses, regulatory fees, and costs related to amortization of other intangible assets. Adjusted operating non-interest expenses were $188.7 million, up from $172.3 million recorded in the prior-year quarter.

Efficiency ratio (GAAP basis) increased to 70.00% from 68.82% in the prior-year quarter. A rise in efficiency ratio indicates decrease in profitability. Adjusted efficiency ratio was 69.78%, up from 68.04% in the prior-year quarter.

As of Mar 31, 2019, average loans and leases were around $12.3 billion, up 2.8% sequentially. Additionally, average deposits climbed 3% from the prior-quarter end to $18.7 billion.

Credit Quality: A Mixed Bag

Total non-accrual and restructured loans were $63.3 million, down 6.4% year over year. However, provision for loan losses came in at $12.4 million, up from $10 million in the year-earlier quarter. Also, the ratio of net charge-offs to average loans was 0.41% in the reported quarter, up 4 bps from the year-ago quarter.

Capital & Profitability Ratios Worsen

As of Mar 31, 2019, Tier 1 risk-based capital ratio was 12.70% compared with 13.36% as of Mar 31, 2018. Further, total risk-based capital ratio was 13.72% compared with 14.45% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.65% compared with 10.20% as of Mar 31, 2018.

Adjusted return on average assets at the end of the quarter was 1.03%, down from 1.15% in the year-ago quarter. Additionally, return on average tangible common equity was 10.56% compared with 11.09% in the prior-year quarter.

Outlook

For full-year 2019, tax rate is likely to be between 15% and 17%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, UMB has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, UMB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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