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UMB (UMBF) Up 0.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for UMB Financial (UMBF - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UMB 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.

UMB Financial Q2 Earnings Top Estimates

UMB Financial’s operating earnings per share of $2.16 beat the Zacks Consensus Estimate of $1.96. Also, the bottom line compared favorably with the $1.93 earned in the year-ago quarter.

Results benefited from higher NII and fee income. Rising loan and deposit balances were other positives. However, a rise in expenses and provisions acted as spoilsport.
  
The results included a reduction of $3.8 million related to the pre-tax FDIC special assessment expense. After considering these charges, the GAAP net income for UMB Financial was $101.3 million for the second quarter, up 19.3% year over year.

Quarterly Revenues & Costs Rise

Quarterly revenues were $390 million, up 7.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $384.3 million.

NII on an FTE basis was $251.5 million, which increased 8.3% from the prior-year quarter. On an FTE basis, Net interest margin (NIM) was 2.51%, up from 2.44% reported in the prior-year quarter.

Non-interest income was $144.9 million, up 5% year over year. The rise was primarily driven by an increase in almost all components of fee income, except for other income. These were partially offset by a decrease in other miscellaneous income and lower investment securities gains. 

Non-interest expenses were $249.1 million, up 3.5% year over year. The rise was driven by higher legal and consulting expenses due to costs related to the acquisition of Heartland Financial USA, Inc. Also, a rise in processing fees due to increased software subscription costs and an uptick in bankcard expenses were some of the other major reasons behind the increase. These were partially offset by a decrease of $3.6 million in regulatory fees expense. The operating non-interest expense was $243.2 million.

The efficiency ratio increased to 63.37%, down from the prior-year quarter’s 65.59%. A decline in the efficiency ratio indicates an increase in profitability.

As of Jun 30, 2024, average loans and leases were $23.8 billion, up 1.9% sequentially. Also, average deposits increased 2.4% to $34.3 billion.

Credit Quality: Mixed Bag

The ratio of net charge-offs to average loans was 0.05% in the reported quarter while the company didn’t record any net charge-offs to average loans in the prior-year quarter. 

Also, total non-accrual and restructured loans were $13.7 million, down 29% year over year.

The provision for credit losses was $14.1 million for the second quarter of 2024, up 8.1% from the prior-year quarter.

Capital Ratios Improve

As of Jun 30, 2024, the Tier 1 risk-based capital ratio was 11.14%, which rose from 10.65% as of Jun 30, 2023. The Tier 1 leverage ratio was 8.50%, which increased from 8.16% as of Jun 30, 2023. The total risk-based capital ratio was 13.08%, which grew from 12.59% in the year-ago quarter.

Profitability Ratios Improve

Return on average assets at the quarter’s end was 0.96%, which increased from the year-ago quarter’s 0.9%. Further, the operating return on average equity was 13.30%, up from 13.08% reported in the previous year’s quarter.

Outlook

Third-Quarter

Management expects, with the prospect of a Fed’s rate cut in September this year, net interest margin to be stable from second- quarter's reported figure of 2.51%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 8.38% due to these changes.

VGM Scores

At this time, UMB has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise UMB has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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