It has been about a month since the last earnings report for People's United . Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is People's United due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
People's United Q4 Earnings Beat, Revenue Escalates
People's United delivered fourth-quarter 2020 operating earnings of 35 cents per share, beating the Zacks Consensus Estimate of 32 cents. The reported figure, however, comes in below the prior-year quarter figure of 37 cents.
Rise in revenues, aided by high fee income, drove the results. Lower expenses reflect prudent expense management. Also, decent loan and deposit balances reflect organic growth, with its capital position remaining strong. However, elevated provisions were an undermining factor. Margin pressure also prevailed.
Net income available to common shareholders came in at $204.2 million or 49 cents per share compared with the $134 million or 31 cents reported in the prior-year quarter.
For full-year 2020, earnings per share came in at $1.27, outpacing the Zacks Consensus Estimate of $1.21. The figure, however, compares unfavorably with the $1.39 earned in the prior year.
Revenues Jump, Expenses Decline
For full-year 2020, the company reported net revenues of $2.1 billion, up 10.5% year on year.
Net revenues, on a fully-taxable basis, were up 10.5% year over year to $568.4 million in the fourth quarter.
Net interest income, on a fully-taxable basis, totaled $390.2 million, flat year over year. Lower interest expenses were offset by reduced interest and dividend income. Net interest margin contracted 30 basis points (bps) year on year to 2.84%.
Non-interest income jumped 43.5% year over year to $178.2 million. Gain on sale of business was recorded during the fourth quarter. Rise in commercial banking lending fees and cash management fees led to this upsurge. Lower bank service charges, investment management fees, insurance revenues, net customer interest rate swap income and other non-interest income were on the downside.
Non-interest expenses decreased 9.9% on a year-over-year basis to $293.4 million. Fall in almost all components of expenses resulted in this decline.
Efficiency ratio was 55.5% compared with the 53.7% recorded in the prior-year period. An increase in the ratio indicates lower profitability.
As of Dec 31, 2020, total loans were $43.9 billion, down 2.9% from the prior quarter. Yet, total deposits jumped 5% sequentially to $52.1 billion.
Credit Quality: A Concern?
Credit metrics deteriorated during the October-December period. As of Dec 31, 2020, non-performing assets were $341.6 million, considerably up 42.2% year on year. Ratio of non-performing loans to total loans expanded 24 basis points (bps) from the year-earlier quarter to 0.75%.
Also, net loan charge-offs doubled year on year to $13.4 million. Net loan charge-offs as a percentage of average total loans were 0.12% on an annualized basis, up 6 bps year over year. Provision for loan losses more than doubled to $14.7 million on a year-over-year basis.
Robust Capital Position and Profitability Ratios
Capital ratios of People’s United remained strong. As of Dec 31, 2020, total risk-based capital ratio increased to 12.4% from the 12% recorded in the comparable quarter last year. Tangible equity ratio was 7.5%, down from the 8% reported in the year-ago quarter. Tier 1 leverage ratio was 8.4% compared with the 9.1% witnessed in the comparable period last year.
The company’s profitability ratios were also solid. Return on average tangible common’ equity was 18.4%, up from the prior-year quarter’s 12.8%. Return on average assets of 1.33% edged up from the 0.98% reported in the year-earlier quarter.
2021 Outlook
Loans are expected in the range of 0-3% (excluding PPP loans). Deposits are likely to be in the growth range of -2 to +2%.
Net interest income is expected to decline 2-4%. Assuming no change in the fed funds rate, net interest margin is projected to be in the range of 2.85-2.95%.
Non-interest income is likely to grow 1-3% from the prior-year adjusted expense base of $372 million.
Operating non-interest expense is expected to be in the range of $1.15 billion-$1.18 billion.
Provisions are expected in the range of $60-$80 million.
Effective tax rate to range in 20-22%.
Common equity tier 1 capital ratio is projected at 10-10.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.47% due to these changes.
VGM Scores
Currently, People's United has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise People's United has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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People's United (PBCT) Up 10.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for People's United . Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is People's United due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
People's United Q4 Earnings Beat, Revenue Escalates
People's United delivered fourth-quarter 2020 operating earnings of 35 cents per share, beating the Zacks Consensus Estimate of 32 cents. The reported figure, however, comes in below the prior-year quarter figure of 37 cents.
Rise in revenues, aided by high fee income, drove the results. Lower expenses reflect prudent expense management. Also, decent loan and deposit balances reflect organic growth, with its capital position remaining strong. However, elevated provisions were an undermining factor. Margin pressure also prevailed.
Net income available to common shareholders came in at $204.2 million or 49 cents per share compared with the $134 million or 31 cents reported in the prior-year quarter.
For full-year 2020, earnings per share came in at $1.27, outpacing the Zacks Consensus Estimate of $1.21. The figure, however, compares unfavorably with the $1.39 earned in the prior year.
Revenues Jump, Expenses Decline
For full-year 2020, the company reported net revenues of $2.1 billion, up 10.5% year on year.
Net revenues, on a fully-taxable basis, were up 10.5% year over year to $568.4 million in the fourth quarter.
Net interest income, on a fully-taxable basis, totaled $390.2 million, flat year over year. Lower interest expenses were offset by reduced interest and dividend income. Net interest margin contracted 30 basis points (bps) year on year to 2.84%.
Non-interest income jumped 43.5% year over year to $178.2 million. Gain on sale of business was recorded during the fourth quarter. Rise in commercial banking lending fees and cash management fees led to this upsurge. Lower bank service charges, investment management fees, insurance revenues, net customer interest rate swap income and other non-interest income were on the downside.
Non-interest expenses decreased 9.9% on a year-over-year basis to $293.4 million. Fall in almost all components of expenses resulted in this decline.
Efficiency ratio was 55.5% compared with the 53.7% recorded in the prior-year period. An increase in the ratio indicates lower profitability.
As of Dec 31, 2020, total loans were $43.9 billion, down 2.9% from the prior quarter. Yet, total deposits jumped 5% sequentially to $52.1 billion.
Credit Quality: A Concern?
Credit metrics deteriorated during the October-December period. As of Dec 31, 2020, non-performing assets were $341.6 million, considerably up 42.2% year on year. Ratio of non-performing loans to total loans expanded 24 basis points (bps) from the year-earlier quarter to 0.75%.
Also, net loan charge-offs doubled year on year to $13.4 million. Net loan charge-offs as a percentage of average total loans were 0.12% on an annualized basis, up 6 bps year over year. Provision for loan losses more than doubled to $14.7 million on a year-over-year basis.
Robust Capital Position and Profitability Ratios
Capital ratios of People’s United remained strong. As of Dec 31, 2020, total risk-based capital ratio increased to 12.4% from the 12% recorded in the comparable quarter last year. Tangible equity ratio was 7.5%, down from the 8% reported in the year-ago quarter. Tier 1 leverage ratio was 8.4% compared with the 9.1% witnessed in the comparable period last year.
The company’s profitability ratios were also solid. Return on average tangible common’ equity was 18.4%, up from the prior-year quarter’s 12.8%. Return on average assets of 1.33% edged up from the 0.98% reported in the year-earlier quarter.
2021 Outlook
Loans are expected in the range of 0-3% (excluding PPP loans). Deposits are likely to be in the growth range of -2 to +2%.
Net interest income is expected to decline 2-4%. Assuming no change in the fed funds rate, net interest margin is projected to be in the range of 2.85-2.95%.
Non-interest income is likely to grow 1-3% from the prior-year adjusted expense base of $372 million.
Operating non-interest expense is expected to be in the range of $1.15 billion-$1.18 billion.
Provisions are expected in the range of $60-$80 million.
Effective tax rate to range in 20-22%.
Common equity tier 1 capital ratio is projected at 10-10.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.47% due to these changes.
VGM Scores
Currently, People's United has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise People's United has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.