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Webster Financial (WBS) Dips 5.7% as Q2 Earnings Miss Estimates
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Webster Financials’ (WBS - Free Report) shares lost 5.7% following the release of its lower than expected second-quarter 2024 results. Adjusted quarterly earnings per share (EPS) of $1.26 missed Zacks Consensus Estimate of $1.34. This compares unfavorably with earnings of $1.50 reported a year ago.
Results were affected by a fall in net interest income (NII) and non-interest income. However, lower expenses and an increase in deposits offer some support.
Net income applicable to common shareholders (GAAP basis) was $177.5 million, down 23.1% from the prior-year quarter’s tally.
Revenues & Expenses Decline
WBS’ total revenues in the quarter dropped 8.7% year over year to $614.6 million. The top line lagged the Zacks Consensus Estimate of $672 million.
NII decreased 1.9% year over year to $572.3 million. The net interest margin was 3.32%, down 3 basis points (bps).
Non-interest income was $42.3 million, down 52.7% year over year. It included a loss from the sale of investment securities and a net gain on the sale of investment securities. Excluding this, non-interest income was up 3.1% from the previous year’s quarter to $92.2 million. The increase was primarily due to the addition of Ametros and a rise in other income, partially offset by lower deposit and loan servicing fees.
Non-interest expenses were $326 million, down 5.3% from the year-ago quarter’s figure. The reported figure included a charge of $40.8 million of merger charges. Excluding these charges, non-interest expenses would have been $336.8 million, up 6.6% year over year. The increase was a result of the addition of Ametros and higher performance-based incentive accruals and higher compensation.
The efficiency ratio was 46.22% compared with 42.20% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans and leases fell marginally year over year to $51.6 billion. However, total deposits increased 6.1% from the year-ago quarter’s levels to $62.3 billion.
Credit Quality Deteriorate
Total non-performing assets were $374.9 million as of Jun 30, 2024, up 68.7% from the year-ago quarter. Allowance for loan losses was 1.30% of the total loans, which increased from 1.22% reported in second-quarter 2023.
The ratio of net charge-offs to annualized average loans was 0.26%, up 10 bps year over year.
The provision for credit losses was $59 million, up 87.3% year over year.
Capital Ratios: Mixed Bag
As of Jun 30, 2024, the Tier 1 risk-based capital ratio was 11.13%, which fell from 11.16% as of Jun 30, 2023. The total risk-based capital ratio was 13.28%, up from the prior-year quarter’s 13.25%.
Profitability Ratios Worsen
Return on average assets was 0.96%, which declined from 1.23% reported in the prior-year quarter. At the end of the second quarter, the return on average common stockholders' equity was 8.40%, which fell from 11.38% in the prior-year quarter.
Our Viewpoint
A decline in non-interest income accompanied by higher provisions for credit losses were major drawbacks for Webster Financial. However, lower expenses offered some support to its financials. Further, the company’s inorganic expansion efforts continue to aid its growth.
Webster Financial Corporation Price, Consensus and EPS Surprise
WaFd, Inc.’s (WAFD - Free Report) third-quarter fiscal 2024 (ended Jun 30) adjusted earnings of 76 cents handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line rose 4.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan balances and lower provisions were other positives. However, a rise in expenses and a slight decline in the deposit balance acted as spoilsports.
Hancock Whitney Corp.’s (HWC - Free Report) second-quarter 2024 earnings per share of $1.31 beat the Zacks Consensus Estimate of $1.19. However, the bottom line compared unfavorably with $1.35 registered in the year-ago quarter.
HWC’s results were aided by an increase in non-interest income. However, a decline in NII and higher expenses and provisions were undermining factors.
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Webster Financial (WBS) Dips 5.7% as Q2 Earnings Miss Estimates
Webster Financials’ (WBS - Free Report) shares lost 5.7% following the release of its lower than expected second-quarter 2024 results. Adjusted quarterly earnings per share (EPS) of $1.26 missed Zacks Consensus Estimate of $1.34. This compares unfavorably with earnings of $1.50 reported a year ago.
Results were affected by a fall in net interest income (NII) and non-interest income. However, lower expenses and an increase in deposits offer some support.
Net income applicable to common shareholders (GAAP basis) was $177.5 million, down 23.1% from the prior-year quarter’s tally.
Revenues & Expenses Decline
WBS’ total revenues in the quarter dropped 8.7% year over year to $614.6 million. The top line lagged the Zacks Consensus Estimate of $672 million.
NII decreased 1.9% year over year to $572.3 million. The net interest margin was 3.32%, down 3 basis points (bps).
Non-interest income was $42.3 million, down 52.7% year over year. It included a loss from the sale of investment securities and a net gain on the sale of investment securities. Excluding this, non-interest income was up 3.1% from the previous year’s quarter to $92.2 million. The increase was primarily due to the addition of Ametros and a rise in other income, partially offset by lower deposit and loan servicing fees.
Non-interest expenses were $326 million, down 5.3% from the year-ago quarter’s figure. The reported figure included a charge of $40.8 million of merger charges. Excluding these charges, non-interest expenses would have been $336.8 million, up 6.6% year over year. The increase was a result of the addition of Ametros and higher performance-based incentive accruals and higher compensation.
The efficiency ratio was 46.22% compared with 42.20% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans and leases fell marginally year over year to $51.6 billion. However, total deposits increased 6.1% from the year-ago quarter’s levels to $62.3 billion.
Credit Quality Deteriorate
Total non-performing assets were $374.9 million as of Jun 30, 2024, up 68.7% from the year-ago quarter. Allowance for loan losses was 1.30% of the total loans, which increased from 1.22% reported in second-quarter 2023.
The ratio of net charge-offs to annualized average loans was 0.26%, up 10 bps year over year.
The provision for credit losses was $59 million, up 87.3% year over year.
Capital Ratios: Mixed Bag
As of Jun 30, 2024, the Tier 1 risk-based capital ratio was 11.13%, which fell from 11.16% as of Jun 30, 2023. The total risk-based capital ratio was 13.28%, up from the prior-year quarter’s 13.25%.
Profitability Ratios Worsen
Return on average assets was 0.96%, which declined from 1.23% reported in the prior-year quarter. At the end of the second quarter, the return on average common stockholders' equity was 8.40%, which fell from 11.38% in the prior-year quarter.
Our Viewpoint
A decline in non-interest income accompanied by higher provisions for credit losses were major drawbacks for Webster Financial. However, lower expenses offered some support to its financials. Further, the company’s inorganic expansion efforts continue to aid its growth.
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 #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
WaFd, Inc.’s (WAFD - Free Report) third-quarter fiscal 2024 (ended Jun 30) adjusted earnings of 76 cents handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line rose 4.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan balances and lower provisions were other positives. However, a rise in expenses and a slight decline in the deposit balance acted as spoilsports.
Hancock Whitney Corp.’s (HWC - Free Report) second-quarter 2024 earnings per share of $1.31 beat the Zacks Consensus Estimate of $1.19. However, the bottom line compared unfavorably with $1.35 registered in the year-ago quarter.
HWC’s results were aided by an increase in non-interest income. However, a decline in NII and higher expenses and provisions were undermining factors.