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Shares of Webster Financial (WBS - Free Report) shot up around 7% following its first-quarter 2018 earnings release, reflecting investors’ positive sentiments on the company’s top-line strength. Earnings per share of 85 cents surpassed the Zacks Consensus Estimate of 79 cents. Also, it compares favorably with 62 cents earned in the prior-year quarter.
Results reflected growth in revenues. Also, loan and deposit balances showed continued improvement along with a strong capital position. However, higher non-interest expenses remained an undermining factor.
Net income available to shareholders for the first quarter came in at $78.1 million, up 36.3% year over year.
Webster Financial’s total revenues in the quarter rose 10.6% from the prior-year quarter to $282.9 million. Also, it surpassed the Zacks Consensus Estimate was $275.5 million.
Net interest income grew 11.2% year over year to $214.2 million. Moreover, net interest margin increased 22 basis points (bps) from the year-ago quarter to 3.44%.
Non-interest income was around $68.7 million, up nearly 9% year over year. The rise was primarily prompted by higher deposit service fees, wealth and investment fees and other income. These were, however, partially offset by a fall in mortgage banking activities along with loan-related fees.
Non-interest expenses of $171.6 million climbed 4.8% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, technology and equipment along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio came in at 59.76% compared with 62.10% as of Mar 31, 2017. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Mar 31, 2018 were $17.8 billion, up 1.6% sequentially. Further total deposits rose 1.9% from the prior month to $21.4 billion.
Credit Quality: A Mixed Bag
The ratio of net charge-offs to annualized average loans came in at 0.13%, stable year over year. Also, total nonperforming assets were $140.1 million, down 21.3% from $177.9 million in the year-ago quarter. Further, the allowance for loan losses represented 1.15% of total loans as of Mar 31, 2018 compared with 1.16% as of Mar 31, 2017.
However, the provision for loan and lease losses rose 4.8% from the year-ago quarter to $11 million.
Improved Capital & Profitability Ratios
As of Mar 31, 2018, Tier 1 risk-based capital ratio was 11.76% compared with 11.42% as of Mar 31, 2017. Also, total risk-based capital ratio came in at 13.25% compared with 12.95% in the prior-year quarter. Tangible common equity ratio was 7.65%, up from 7.34% as of Mar 31, 2017.
The return on average assets was 1.20% in the reported quarter compared with 0.91% in the prior-year quarter. As of Mar 31, 2018, return on average common stockholders' equity came in at 12.15%, up from 9.43% as of Mar 31, 2017.
Our Viewpoint
Webster Financial reported strong quarterly results as reflected by improved revenues and loan balance. Its strong capital position keeps it well poised to undertake growth initiatives. Also, its efforts to expand HSA Bank segment bode well for long term. However, increase in expenses deters bottom-line growth to some extent.
Webster Financial Corporation Price, Consensus and EPS Surprise
Driven by top-line strength, Texas Capital Bancshares (TCBI - Free Report) reported a positive earnings surprise of around 0.7% in first-quarter 2018. Earnings per share of $1.38 outpaced the Zacks Consensus Estimate by a penny. Moreover, results compared favorably with 80 cents recorded in the prior-year quarter.
BancorpSouth reported first-quarter 2018 operating earnings of 54 cents per share, beating the Zacks Consensus Estimate of 50 cents. Also, the bottom line compared favorably with the year-ago quarter earnings of 41 cents.
U.S. Bancorp’s (USB - Free Report) first-quarter 2018 adjusted earnings per share of 95 cents surpassed the Zacks Consensus Estimate by a penny. The figure came ahead of the prior-year quarter earnings of 82 cents.
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Webster Financial (WBS) Q1 Earnings Improve Y/Y, Costs Rise
Shares of Webster Financial (WBS - Free Report) shot up around 7% following its first-quarter 2018 earnings release, reflecting investors’ positive sentiments on the company’s top-line strength. Earnings per share of 85 cents surpassed the Zacks Consensus Estimate of 79 cents. Also, it compares favorably with 62 cents earned in the prior-year quarter.
Results reflected growth in revenues. Also, loan and deposit balances showed continued improvement along with a strong capital position. However, higher non-interest expenses remained an undermining factor.
Net income available to shareholders for the first quarter came in at $78.1 million, up 36.3% year over year.
Revenue Growth Offsets Higher Expenses, Loans & Deposits Rise
Webster Financial’s total revenues in the quarter rose 10.6% from the prior-year quarter to $282.9 million. Also, it surpassed the Zacks Consensus Estimate was $275.5 million.
Net interest income grew 11.2% year over year to $214.2 million. Moreover, net interest margin increased 22 basis points (bps) from the year-ago quarter to 3.44%.
Non-interest income was around $68.7 million, up nearly 9% year over year. The rise was primarily prompted by higher deposit service fees, wealth and investment fees and other income. These were, however, partially offset by a fall in mortgage banking activities along with loan-related fees.
Non-interest expenses of $171.6 million climbed 4.8% from the prior-year quarter. The rise was mainly due to higher compensation and benefits expenses, technology and equipment along with other expenses, partially offset by a fall in marketing and occupancy costs.
Efficiency ratio came in at 59.76% compared with 62.10% as of Mar 31, 2017. A lower ratio indicates improved profitability.
The company’s total loans and leases as of Mar 31, 2018 were $17.8 billion, up 1.6% sequentially. Further total deposits rose 1.9% from the prior month to $21.4 billion.
Credit Quality: A Mixed Bag
The ratio of net charge-offs to annualized average loans came in at 0.13%, stable year over year. Also, total nonperforming assets were $140.1 million, down 21.3% from $177.9 million in the year-ago quarter. Further, the allowance for loan losses represented 1.15% of total loans as of Mar 31, 2018 compared with 1.16% as of Mar 31, 2017.
However, the provision for loan and lease losses rose 4.8% from the year-ago quarter to $11 million.
Improved Capital & Profitability Ratios
As of Mar 31, 2018, Tier 1 risk-based capital ratio was 11.76% compared with 11.42% as of Mar 31, 2017. Also, total risk-based capital ratio came in at 13.25% compared with 12.95% in the prior-year quarter. Tangible common equity ratio was 7.65%, up from 7.34% as of Mar 31, 2017.
The return on average assets was 1.20% in the reported quarter compared with 0.91% in the prior-year quarter. As of Mar 31, 2018, return on average common stockholders' equity came in at 12.15%, up from 9.43% as of Mar 31, 2017.
Our Viewpoint
Webster Financial reported strong quarterly results as reflected by improved revenues and loan balance. Its strong capital position keeps it well poised to undertake growth initiatives. Also, its efforts to expand HSA Bank segment bode well for long term. However, increase in expenses deters bottom-line growth to some extent.
Webster Financial Corporation Price, Consensus and EPS Surprise
Webster Financial Corporation Price, Consensus and EPS Surprise | Webster Financial Corporation Quote
Webster Financial 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
Driven by top-line strength, Texas Capital Bancshares (TCBI - Free Report) reported a positive earnings surprise of around 0.7% in first-quarter 2018. Earnings per share of $1.38 outpaced the Zacks Consensus Estimate by a penny. Moreover, results compared favorably with 80 cents recorded in the prior-year quarter.
BancorpSouth reported first-quarter 2018 operating earnings of 54 cents per share, beating the Zacks Consensus Estimate of 50 cents. Also, the bottom line compared favorably with the year-ago quarter earnings of 41 cents.
U.S. Bancorp’s (USB - Free Report) first-quarter 2018 adjusted earnings per share of 95 cents surpassed the Zacks Consensus Estimate by a penny. The figure came ahead of the prior-year quarter earnings of 82 cents.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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