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People's United (PBCT) Q2 Earnings Meet Estimates, Costs Rise
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People's United Financial Inc. reported second-quarter 2020 operating earnings of 24 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line was below the year-ago quarter’s 34 cents.
Second-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 the impacts of coronavirus was a major offsetting factor.
After considering certain non-recurring items, net income available to common shareholders was $86.4 million compared with $129.7 million reported in the prior-year quarter.
Revenue Growth Offsets Higher Expenses
Revenues were up 9% year over year to $495.2 million in the second quarter. The top line lagged the Zacks Consensus Estimate of $495.9 million by a slight margin.
Net interest income, on a fully taxable basis, totaled $413 million, up 16.2% year over year. The rise was mainly due to a considerable fall in interest expenses. Nevertheless, net interest margin contracted 7 basis points (bps) to 3.05%.
Non-interest income declined 15.7% year over year to $89.6 million. Lower bank service charges, customer interest rate swap and other income led to the downside.
Non-interest expenses jumped 9.2% on a year-over-year basis to $304 million. Increase in all components, except for operating lease expenses, led to the rise.
Efficiency ratio was 53.5% compared with 55.8% in the prior-year quarter. A decline in the ratio indicates improved profitability.
As of Jun 30, 2020, total loans were $45.5 billion, up 2.6% from the prior quarter. Also, total deposits grew 11.6% sequentially to $49.9 billion.
Credit Quality Deteriorates
As of Jun 30, 2020, non-performing assets were $314.6 million, up 48.2% year over year. Ratio of non-performing assets to total loans was 0.69% compared with 0.55% in the year-ago quarter.
Also, net loan charge-offs more than doubled year over year to $8.5 million. Net loan charge-offs as a percentage of average total loans were 0.08% on an annualized basis, up 3 bps year over year. Provision for loan losses was $80.8 million compared with $7.6 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Jun 30, 2020, total risk-based capital ratio decreased to 11.8% from 12% recorded a year ago. Also, the ratio of tangible equity to assets was 7.3%, down year over year from 7.7%.
Return on average tangible stockholders’ equity was 8.1%, down from the prior-year quarter’s 14.1%. Return on average assets of 0.58% declined from 1.04% as of Jun 30, 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 the coronavirus-induced economic slowdown remain major near-term concerns.
Peoples United Financial, Inc. Price, Consensus and EPS Surprise
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings were 46 cents per share, missing the Zacks Consensus Estimate by a penny. The figure also declined 31.3% year over year.
Fifth Third Bancorp (FITB - Free Report) reported second-quarter 2020 adjusted earnings of 30 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. However, results compared unfavorably with the prior-year quarter’s earnings of 71 cents per share.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted earnings per share of 26 cents in second-quarter 2020, beating the Zacks Consensus Estimate of 16 cents. The reported figure excluded certain noteworthy items, such as the impacts of the MSR impairment charges, severance accruals, non-recurring software and merger-related expenses.
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With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
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People's United (PBCT) Q2 Earnings Meet Estimates, Costs Rise
People's United Financial Inc. reported second-quarter 2020 operating earnings of 24 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line was below the year-ago quarter’s 34 cents.
Second-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 the impacts of coronavirus was a major offsetting factor.
After considering certain non-recurring items, net income available to common shareholders was $86.4 million compared with $129.7 million reported in the prior-year quarter.
Revenue Growth Offsets Higher Expenses
Revenues were up 9% year over year to $495.2 million in the second quarter. The top line lagged the Zacks Consensus Estimate of $495.9 million by a slight margin.
Net interest income, on a fully taxable basis, totaled $413 million, up 16.2% year over year. The rise was mainly due to a considerable fall in interest expenses. Nevertheless, net interest margin contracted 7 basis points (bps) to 3.05%.
Non-interest income declined 15.7% year over year to $89.6 million. Lower bank service charges, customer interest rate swap and other income led to the downside.
Non-interest expenses jumped 9.2% on a year-over-year basis to $304 million. Increase in all components, except for operating lease expenses, led to the rise.
Efficiency ratio was 53.5% compared with 55.8% in the prior-year quarter. A decline in the ratio indicates improved profitability.
As of Jun 30, 2020, total loans were $45.5 billion, up 2.6% from the prior quarter. Also, total deposits grew 11.6% sequentially to $49.9 billion.
Credit Quality Deteriorates
As of Jun 30, 2020, non-performing assets were $314.6 million, up 48.2% year over year. Ratio of non-performing assets to total loans was 0.69% compared with 0.55% in the year-ago quarter.
Also, net loan charge-offs more than doubled year over year to $8.5 million. Net loan charge-offs as a percentage of average total loans were 0.08% on an annualized basis, up 3 bps year over year. Provision for loan losses was $80.8 million compared with $7.6 million in the year-ago quarter.
Capital Position and Profitability Ratios
As of Jun 30, 2020, total risk-based capital ratio decreased to 11.8% from 12% recorded a year ago. Also, the ratio of tangible equity to assets was 7.3%, down year over year from 7.7%.
Return on average tangible stockholders’ equity was 8.1%, down from the prior-year quarter’s 14.1%. Return on average assets of 0.58% declined from 1.04% as of Jun 30, 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 the coronavirus-induced economic slowdown remain major near-term concerns.
Peoples United Financial, Inc. Price, Consensus and EPS Surprise
Peoples United Financial, Inc. price-consensus-eps-surprise-chart | Peoples United Financial, Inc. Quote
Currently, People’s United 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
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings were 46 cents per share, missing the Zacks Consensus Estimate by a penny. The figure also declined 31.3% year over year.
Fifth Third Bancorp (FITB - Free Report) reported second-quarter 2020 adjusted earnings of 30 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. However, results compared unfavorably with the prior-year quarter’s earnings of 71 cents per share.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted earnings per share of 26 cents in second-quarter 2020, beating the Zacks Consensus Estimate of 16 cents. The reported figure excluded certain noteworthy items, such as the impacts of the MSR impairment charges, severance accruals, non-recurring software and merger-related expenses.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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