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Shares of Webster Financial (WBS - Free Report) tanked 2.2% in response to the decline in first-quarter 2020 revenues. Earnings per share of 39 cents surpassed the Zacks Consensus Estimate of 36 cents. However, the reported figure declined from the prior-year quarter number of $1.06.
Higher non-interest expenses and provision for loan losses along with contracting net interest margin (NIM) acted as major headwinds. Nonetheless, growth in loan and deposit balances as well as impressive capital ratios were positives.
The company reported earnings applicable to common shareholders of $36 million, down from the prior-year quarter’s $97.5 million.
Webster Financial’s total revenues declined around 2% year over year to $304.2 million. Nonetheless, the top line outpaced the Zacks Consensus Estimate of $303.8 million.
Net interest income declined 4.5% year over year to $230.8 million. Moreover, NIM contracted 51 basis points (bps) to 3.23%.
Non-interest income was $73.4 million, up 7% year over year. The rise resulted from higher other income, increase in mortgage banking activities, and wealth and investment services.
Non-interest expenses of $178.8 million flared up 1.8% from the year-ago quarter. The upswing mainly resulted from rise in all components except for marketing, loan workout expenses and other expenses.
Efficiency ratio (on a non-GAAP basis) was 58.03% compared with 55.93% as of Mar 31, 2019. A higher ratio indicates lower profitability.
The company’s total loans and leases as of Mar 31, 2020, were $20.9 billion, up 4.3% sequentially. Also, total deposits increased 5.2% from the previous quarter to $24.5 billion.
Credit Quality Deteriorates
Total non-performing assets were $169.1 million as of Mar 31, 2020, up 2.9% from the year-ago quarter. In addition, the ratio of net charge-offs to annualized average loans was 0.15%, down 6 bps year over year. Also, the provision for loan and lease losses increased to $76 million as of Mar 31, 2020, compared with $8.6 million in the prior year.
Moreover, allowance for loan losses represented 1.60% of total loans, up 48 bps from Mar 31, 2019.
Capital Ratios Improve, Profitability Ratios Decline
As of Mar 31, 2020, Tier 1 risk-based capital ratio was 11.60% compared with 12.17% as of Mar 31, 2019. Additionally, total risk-based capital ratio was 13.11% compared with the prior-year quarter’s 13.60%. Tangible common equity ratio was 7.67% compared with the year-ago figure of 8.16%.
Return on average assets was 0.50% in the reported quarter compared with the year-ago quarter’s 1.44%. As of Mar 31, 2020, return on average common stockholders' equity came in at 4.75%, down from 14.01% year over year.
Our Viewpoint
Webster Financial’s performance in the first quarter was encouraging. Top-line growth was supported by non-interest income during the March-end quarter. Further, given the rise in loan and deposit balances, Webster Financial remains well-positioned for growth.
However, rise in provisions and lower interest rates hurt its first-quarter earnings amid the coronavirus-led concerns. Also, increasing expenses and lower NIM are expected to continue to drag its bottom-line growth in the near term.
Webster Financial Corporation Price, Consensus and EPS Surprise
M&T Bank Corporation (MTB - Free Report) has pulled off first-quarter 2020 positive earnings surprise of 26% on higher mortgage banking revenues. Net operating earnings per share of $1.95 surpassed the Zacks Consensus Estimate of $1.55. However, the bottom line compared unfavorably with $3.35 per share reported in the year-ago quarter.
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
Regions Financial Corporation (RF - Free Report) reported first-quarter 2020 adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5% year over year.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Webster Financial (WBS) Tops Q1 Earnings Estimates, Stock Dips
Shares of Webster Financial (WBS - Free Report) tanked 2.2% in response to the decline in first-quarter 2020 revenues. Earnings per share of 39 cents surpassed the Zacks Consensus Estimate of 36 cents. However, the reported figure declined from the prior-year quarter number of $1.06.
Higher non-interest expenses and provision for loan losses along with contracting net interest margin (NIM) acted as major headwinds. Nonetheless, growth in loan and deposit balances as well as impressive capital ratios were positives.
The company reported earnings applicable to common shareholders of $36 million, down from the prior-year quarter’s $97.5 million.
Revenues Decline, Expenses Rise, Loans & Deposits Improve
Webster Financial’s total revenues declined around 2% year over year to $304.2 million. Nonetheless, the top line outpaced the Zacks Consensus Estimate of $303.8 million.
Net interest income declined 4.5% year over year to $230.8 million. Moreover, NIM contracted 51 basis points (bps) to 3.23%.
Non-interest income was $73.4 million, up 7% year over year. The rise resulted from higher other income, increase in mortgage banking activities, and wealth and investment services.
Non-interest expenses of $178.8 million flared up 1.8% from the year-ago quarter. The upswing mainly resulted from rise in all components except for marketing, loan workout expenses and other expenses.
Efficiency ratio (on a non-GAAP basis) was 58.03% compared with 55.93% as of Mar 31, 2019. A higher ratio indicates lower profitability.
The company’s total loans and leases as of Mar 31, 2020, were $20.9 billion, up 4.3% sequentially. Also, total deposits increased 5.2% from the previous quarter to $24.5 billion.
Credit Quality Deteriorates
Total non-performing assets were $169.1 million as of Mar 31, 2020, up 2.9% from the year-ago quarter. In addition, the ratio of net charge-offs to annualized average loans was 0.15%, down 6 bps year over year. Also, the provision for loan and lease losses increased to $76 million as of Mar 31, 2020, compared with $8.6 million in the prior year.
Moreover, allowance for loan losses represented 1.60% of total loans, up 48 bps from Mar 31, 2019.
Capital Ratios Improve, Profitability Ratios Decline
As of Mar 31, 2020, Tier 1 risk-based capital ratio was 11.60% compared with 12.17% as of Mar 31, 2019. Additionally, total risk-based capital ratio was 13.11% compared with the prior-year quarter’s 13.60%. Tangible common equity ratio was 7.67% compared with the year-ago figure of 8.16%.
Return on average assets was 0.50% in the reported quarter compared with the year-ago quarter’s 1.44%. As of Mar 31, 2020, return on average common stockholders' equity came in at 4.75%, down from 14.01% year over year.
Our Viewpoint
Webster Financial’s performance in the first quarter was encouraging. Top-line growth was supported by non-interest income during the March-end quarter. Further, given the rise in loan and deposit balances, Webster Financial remains well-positioned for growth.
However, rise in provisions and lower interest rates hurt its first-quarter earnings amid the coronavirus-led concerns. Also, increasing expenses and lower NIM are expected to continue to drag its bottom-line growth in the near term.
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 #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
M&T Bank Corporation (MTB - Free Report) has pulled off first-quarter 2020 positive earnings surprise of 26% on higher mortgage banking revenues. Net operating earnings per share of $1.95 surpassed the Zacks Consensus Estimate of $1.55. However, the bottom line compared unfavorably with $3.35 per share reported in the year-ago quarter.
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
Regions Financial Corporation (RF - Free Report) reported first-quarter 2020 adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5% year over year.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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