Hilltop Holdings (HTH) Q3 Earnings Beat, Revenues & Costs Dip
Hilltop Holdings Inc.’s HTH third-quarter 2022 earnings of 50 cents per share easily outpaced the Zacks Consensus Estimate of 22 cents. However, the bottom line plunged 56.5% from the prior-year quarter.
Results primarily benefited from higher rates and rising loan balance, which led to an increase in net interest income (NII). Also, lower expenses acted as a tailwind. However, lower non-interest income mainly due to the weak mortgage business was the undermining factor.
Net income attributable to Hilltop Holdings was $32.1 million, down 65.5% year over year.
Revenues & Expenses Decline
Net revenues were $330.5 million, declining 30.1% year over year. The top line beat the Zacks Consensus Estimate of $307.4 million.
Net interest income grew 17.5% year over year to $123.5 million. The net interest margin (taxable-equivalent basis) was 3.20%, expanding 66 basis points (bps) year over year.
Non-interest income was $207 million, plunging 43.7% year over year. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income.
Non-interest expenses fell 18.7% year over year to $288.7 million. The decline was due to a fall in almost all expense components.
As of Sep 30, 2022, net loans held for investment were $7.85 billion, up marginally from the end of the prior quarter. Total deposits were $11.35 billion, down 4.8%.
Credit Quality Improves
Reversal of credit losses was $0.78 million compared with $5.8 million in the prior-year quarter. As of Sep 30, 2022, non-performing assets as a percentage of total assets were 0.22%, down 25 bps from the prior-year quarter.
Profitability & Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.79%, down from the prior-year quarter’s 2.13%. The return on average equity was 6.26%, down from 14.96%.
Common equity tier 1 capital ratio was 17.45% as of Sep 30, 2022, down from 21.28% in the corresponding period of 2021. The total capital ratio was 20.07%, reflecting a fall from the year-ago period’s 24%.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, because of the company’s continued investments in franchise, expenses are anticipated to increase in the near term, hurting profits to an extent.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Hilltop Holdings Inc. price-consensus-eps-surprise-chart | Hilltop Holdings Inc. Quote
Hilltop Holdings currently 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
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s JPM third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents per share of net investment securities losses in the Corporate segment.
The disappointing investment banking performance, bigger reserve build and increased operating expenses hampered JPM’s quarterly performance to some extent.
Wells Fargo’s WFC third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. The rise in non-interest expenses acted as another headwind.
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