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Low Rates, High Costs to Hurt Hancock Whitney's (HWC) Profits
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Hancock Whitney Corporation’s (HWC - Free Report) net interest margin (NIM) is expected to be adversely impacted in the near term due to lower interest rates amid the Federal Reserve’s accommodative monetary policy. Also, continuously increasing expenses is a concern.
The Zacks Consensus Estimate for current-year earnings has declined64.4% over the past 30 days. The company currently carries a Zacks Rank #5 (Strong Sell).
Its price performance does not seem encouraging as well. Shares of Hancock Whitney have lost 56% so far this year compared with a 42% decline recorded by the industry.
Looking at fundamentals, while the company’s NIM (tax-equivalent) improved in 2019 on a year-over-year basis, it declined in 2018 and the first quarter of 2020. Because of near-zero interest rates, its margins are expected to remain under pressure in the near term, thus hurting the top line.
The company’s total non-interest expenses (excluding non-operating expenses) witnessed a five-year (2015-2019) CAGR of 5.6% mainly due to a rise in personnel costs and other operating expenses. While the acquisition of MidSouth Bancorp will likely result in significant cost savings, Hancock Whitney’s continued efforts to expand inorganically and hire additional workforce are expected to keep costs elevated in the near term.
Further, the company’s current liquidity position might not be sufficient to meet interest and/or debt obligations if the economic situation worsens.
Hancock Whitney’s significant exposure to risky loan portfolios makes us apprehensive about its growth prospects. As of Mar 31, 2020, the company’s exposure to residential mortgage, construction and land development as well as commercial real estate loans constituted 34% of total loans. If there is any deterioration in real estate prices amid the current dismal economic scenario, the company’s financials will be hurt.
Nevertheless, its investments in growth markets are expected to be accretive to earnings and also bolster the bank’s presence in such areas. Given a solid capital, the company is expected to be able to sustain its capital-deployment actions, thus, continuing to enhance shareholder value.
A few stocks from the finance space worth a look are mentioned below.
Tradeweb Markets Inc. (TW - Free Report) has witnessed an upward earnings estimate revision of 6.6% for 2020 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has gained 34.9% so far this year.
GAIN Capital Holdings, Inc.’s current-year earnings estimates increased significantly in 60 days’ time. Further, the company’s shares have appreciated 60.5% year to date. At present, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mackinac Financial Corporation has witnessed an upward earnings estimate revision of 47.1% for the ongoing year in the past 60 days. This Zacks #2 Ranked (Buy) stock has depreciated 45.7% so far this year.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Low Rates, High Costs to Hurt Hancock Whitney's (HWC) Profits
Hancock Whitney Corporation’s (HWC - Free Report) net interest margin (NIM) is expected to be adversely impacted in the near term due to lower interest rates amid the Federal Reserve’s accommodative monetary policy. Also, continuously increasing expenses is a concern.
The Zacks Consensus Estimate for current-year earnings has declined64.4% over the past 30 days. The company currently carries a Zacks Rank #5 (Strong Sell).
Its price performance does not seem encouraging as well. Shares of Hancock Whitney have lost 56% so far this year compared with a 42% decline recorded by the industry.
Looking at fundamentals, while the company’s NIM (tax-equivalent) improved in 2019 on a year-over-year basis, it declined in 2018 and the first quarter of 2020. Because of near-zero interest rates, its margins are expected to remain under pressure in the near term, thus hurting the top line.
The company’s total non-interest expenses (excluding non-operating expenses) witnessed a five-year (2015-2019) CAGR of 5.6% mainly due to a rise in personnel costs and other operating expenses. While the acquisition of MidSouth Bancorp will likely result in significant cost savings, Hancock Whitney’s continued efforts to expand inorganically and hire additional workforce are expected to keep costs elevated in the near term.
Further, the company’s current liquidity position might not be sufficient to meet interest and/or debt obligations if the economic situation worsens.
Hancock Whitney’s significant exposure to risky loan portfolios makes us apprehensive about its growth prospects. As of Mar 31, 2020, the company’s exposure to residential mortgage, construction and land development as well as commercial real estate loans constituted 34% of total loans. If there is any deterioration in real estate prices amid the current dismal economic scenario, the company’s financials will be hurt.
Nevertheless, its investments in growth markets are expected to be accretive to earnings and also bolster the bank’s presence in such areas. Given a solid capital, the company is expected to be able to sustain its capital-deployment actions, thus, continuing to enhance shareholder value.
A few stocks from the finance space worth a look are mentioned below.
Tradeweb Markets Inc. (TW - Free Report) has witnessed an upward earnings estimate revision of 6.6% for 2020 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has gained 34.9% so far this year.
GAIN Capital Holdings, Inc.’s current-year earnings estimates increased significantly in 60 days’ time. Further, the company’s shares have appreciated 60.5% year to date. At present, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mackinac Financial Corporation has witnessed an upward earnings estimate revision of 47.1% for the ongoing year in the past 60 days. This Zacks #2 Ranked (Buy) stock has depreciated 45.7% so far this year.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>