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People's United (PBCT) Q1 Earnings In Line, Revenues Up

Zacks Equity Research

People's United Financial Inc. PBCT delivered first-quarter 2019 operating earnings of 33 cents per share, in line with the Zacks Consensus Estimate. The reported figure improved 10%, year over year.

Elevated expenses and provisions remained major drags. However, rising rates and higher fee income supported the company’s results. Improvement in loan and deposit balances reflected organic growth, with its capital position remaining strong.

Net income available to common shareholders came in at $111.1 million compared with $104.4 million reported in the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Net revenues, on a fully-taxable basis, were up 10.7% year over year to $434.6 million in the first quarter. Moreover, the figure surpassed the Zacks Consensus Estimate of $432 million.

Net interest income, on a fully-taxable basis, totaled $340 million, up 12.5% year over year. Further, net interest margin expanded 15 basis points (bps) year over year to 3.20%.

Non-interest income climbed 4.6% year over year to $94.6 million. Rise in almost all components of income led to this upside. These were partially offset by lower investment management fees, commercial banking lending fees and brokerage commissions.

Non-interest expenses flared up 7.7% on a year-over-year basis to $262.2 million. Rise in mostly all components escalated expenses.

Efficiency ratio was 57.3% compared with 59.4% recorded in the prior-year period. A decrease in the ratio indicates improved profitability.

As of Mar 31, 2019, total loans were $35.5 billion, slightly up from the prior quarter. Furthermore, total deposits inched up approximately 1.9% sequentially to $36.9 billion.

Credit Quality: A Mixed Bag

As of Mar 31, 2019, non-performing assets were $167 million, down 4% year over year. Ratio of non-performing loans to total originated loans contracted 3 bps from the year-earlier quarter to 0.49%.

However, net loan charge-offs climbed 13.3% year over year to $5.1 million. Net loan charge-offs as a percentage of average total loans were 0.06% on an annualized basis, stable year over year. Provision for loan losses came in at $5.6 million, up 3.7% year over year.

Strong Capital Position and Profitability Ratios

Capital ratios of People’s United remained strong. As of Mar 31, 2019, total risk-based capital ratio decreased to 12.4% from 12.6% recorded in the comparable quarter last year. Tangible equity ratio was 7.7%, up from 7.3% reported in the year-ago quarter.

The company’s profitability ratios remain strong. Return on average tangible stockholders’ equity was 13%, down from the prior-year quarter’s 13.8%. Return on average assets of 0.96% edged down from 0.98% reported in the year-earlier quarter.

Capital Deployment

Concurrent with the earnings release, the company's board of directors announced increased common stock dividend of 17.75 cents per share, up 14% from the prior payout. The new dividend will be paid on May 15, to shareholders of record as of May 1, 2019.

Our Viewpoint

People’s United’s organic growth continued backed by a steady rise in revenues, mainly aided by high loan and deposit balances. Though escalating non-interest expenses are expected to restrict bottom-line expansion in the upcoming quarters, the company is steadily growing via acquisitions. This is likely to continue in the near future as well, supported by its strong balance-sheet position.

People's United Financial, Inc. Price, Consensus and EPS Surprise

People's United Financial, Inc. Price, Consensus and EPS Surprise | People's United Financial, Inc. Quote

Currently, People’s United 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

Riding on higher revenues, Citizens Financial Group, Inc. CFG delivered a positive earnings surprise of 4.5% in first-quarter 2019. Adjusted earnings per share came in at 93 cents, beating the Zacks Consensus Estimate of 89 cents. Also, the reported figure improved 19.2% year over year. Results excluded one-time items of $4 million or 1 cent per share.

PNC Financial PNC reported positive earnings surprise of 0.8% in the Jan-Mar quarter. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflected a 7.4% jump from the prior-year quarter. Higher revenues, driven by easing margin pressure and escalating fee income, aided the results. However, rise in costs and provisions were headwinds.

Comerica CMA delivered positive earnings surprise of 7.2% in the Mar-end quarter on high interest income. Adjusted earnings per share of $2.08 in the quarter handily outpaced the Zacks Consensus Estimate of $1.94. In addition, earnings were up from the prior-year quarter adjusted figure of $1.54. Including certain non-recurring items, earnings came in at $2.11.

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