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People's United (PBCT) Q1 Earnings Beat, Revenues Rise Y/Y
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People's United Financial Inc. reported first-quarter 2020 operating earnings of 33 cents per share, which surpassed the Zacks Consensus Estimate of 22 cents. Also, the bottom line was in line with the year-ago quarter’s reported figure.
First-quarter results reflected improvement in loan and deposit balances, and revenues. Also, a strong capital position supported the company’s results. However, elevated expenses and margin contraction were headwinds. Further, a drastic increase in provision for credit losses due to application of CECL and the impacts of coronavirus was a major offsetting factor.
After considering certain non-recurring items, net income available to common shareholders was $126.9 million compared with $111.1 million reported in the prior-year quarter.
Revenue Growth Offsets Higher Expenses
Revenues were up 21.6% year over year to $519.8 million in the first quarter. Also, the top line beat the Zacks Consensus Estimate of $498.2 million.
Net interest income, on a fully taxable basis, totaled $403.7 million, up 18.7% year over year. The rise was mainly due to higher earning assets. Nevertheless, net interest margin contracted 8 basis points (bps) to 3.12%.
Non-interest income rose 30.9% year over year to $123.8 million. Rise in almost all components of income led to the upside.
Non-interest expenses jumped 15.5% on a year-over-year basis to $320.1 million. Increase in all components, except for other expenses, led to the rise.
Efficiency ratio was 54% compared with 57.3% in the prior-year quarter. A decline in the ratio indicates improved profitability.
As of Mar 31, 2020, total loans were $44.3 billion, up 1.6% from the prior quarter. Also, total deposits grew 2.6% sequentially to $44.7 billion.
Credit Quality Deteriorates
As of Mar 31, 2020, non-performing assets were $261.8 million, up 24.6% year over year. Ratio of non-performing assets to total originated loans remained stable at 0.54%.
Also, net loan charge-offs more than doubled year over year to $10.6 million. Net loan charge-offs as a percentage of average total loans were 0.1% on an annualized basis, up 4 bps. Provision for loan losses was $33.5 million compared with $5.6 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Mar 31, 2020, total risk-based capital ratio decreased to 11.3% from 12.4% recorded a year ago. Tangible equity ratio was 7.4%, down from 7.7%.
Return on average tangible stockholders’ equity was 11.8%, down from the prior-year quarter’s 13%. Return on average assets of 0.89% declined from 0.96% as of Mar 31, 2020.
Our Viewpoint
People’s United remains well-positioned for revenue improvement through continued loan growth. Further, its robust balance sheet position is expected to support inorganic expansion, going forward. However, escalating non-interest expenses are expected to restrict bottom-line expansion. Also, lower interest rates and coronavirus-induced economic slowdown remain major near-term concerns.
People's United Financial, Inc. Price, Consensus and EPS Surprise
Huntington Bancshares’ (HBAN - Free Report) first-quarter 2020 earnings per share of 3 cents lagged the Zacks Consensus Estimate of 12 cents amid the coronavirus crisis. The bottom-line figure was 91% lower than the prior-year quarter’s reported number.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted loss per share of 11 cents in first-quarter 2020, lagging the Zacks Consensus Estimate for earnings of 94 cents. The reported figure excluded certain noteworthy items such as the impacts of the MSR impairment charges and merger-related expenses.
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
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People's United (PBCT) Q1 Earnings Beat, Revenues Rise Y/Y
People's United Financial Inc. reported first-quarter 2020 operating earnings of 33 cents per share, which surpassed the Zacks Consensus Estimate of 22 cents. Also, the bottom line was in line with the year-ago quarter’s reported figure.
First-quarter results reflected improvement in loan and deposit balances, and revenues. Also, a strong capital position supported the company’s results. However, elevated expenses and margin contraction were headwinds. Further, a drastic increase in provision for credit losses due to application of CECL and the impacts of coronavirus was a major offsetting factor.
After considering certain non-recurring items, net income available to common shareholders was $126.9 million compared with $111.1 million reported in the prior-year quarter.
Revenue Growth Offsets Higher Expenses
Revenues were up 21.6% year over year to $519.8 million in the first quarter. Also, the top line beat the Zacks Consensus Estimate of $498.2 million.
Net interest income, on a fully taxable basis, totaled $403.7 million, up 18.7% year over year. The rise was mainly due to higher earning assets. Nevertheless, net interest margin contracted 8 basis points (bps) to 3.12%.
Non-interest income rose 30.9% year over year to $123.8 million. Rise in almost all components of income led to the upside.
Non-interest expenses jumped 15.5% on a year-over-year basis to $320.1 million. Increase in all components, except for other expenses, led to the rise.
Efficiency ratio was 54% compared with 57.3% in the prior-year quarter. A decline in the ratio indicates improved profitability.
As of Mar 31, 2020, total loans were $44.3 billion, up 1.6% from the prior quarter. Also, total deposits grew 2.6% sequentially to $44.7 billion.
Credit Quality Deteriorates
As of Mar 31, 2020, non-performing assets were $261.8 million, up 24.6% year over year. Ratio of non-performing assets to total originated loans remained stable at 0.54%.
Also, net loan charge-offs more than doubled year over year to $10.6 million. Net loan charge-offs as a percentage of average total loans were 0.1% on an annualized basis, up 4 bps. Provision for loan losses was $33.5 million compared with $5.6 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Mar 31, 2020, total risk-based capital ratio decreased to 11.3% from 12.4% recorded a year ago. Tangible equity ratio was 7.4%, down from 7.7%.
Return on average tangible stockholders’ equity was 11.8%, down from the prior-year quarter’s 13%. Return on average assets of 0.89% declined from 0.96% as of Mar 31, 2020.
Our Viewpoint
People’s United remains well-positioned for revenue improvement through continued loan growth. Further, its robust balance sheet position is expected to support inorganic expansion, going forward. However, escalating non-interest expenses are expected to restrict bottom-line expansion. Also, lower interest rates and coronavirus-induced economic slowdown remain major near-term concerns.
People's United Financial, Inc. Price, Consensus and EPS Surprise
People's United Financial, Inc. price-consensus-eps-surprise-chart | People's United Financial, Inc. Quote
Currently, People’s United carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Huntington Bancshares’ (HBAN - Free Report) first-quarter 2020 earnings per share of 3 cents lagged the Zacks Consensus Estimate of 12 cents amid the coronavirus crisis. The bottom-line figure was 91% lower than the prior-year quarter’s reported number.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted loss per share of 11 cents in first-quarter 2020, lagging the Zacks Consensus Estimate for earnings of 94 cents. The reported figure excluded certain noteworthy items such as the impacts of the MSR impairment charges and merger-related expenses.
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
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 >>