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People's United (PBCT) Q1 Earnings Beat, Revenues Rise Y/Y

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People's United Financial Inc. PBCT reported first-quarter 2020 operating earnings of 33 cents per share, which surpassed the Zacks Consensus Estimate of 22 cents. Also, the bottom line was in line with the year-ago quarter’s reported figure.

First-quarter results reflected improvement in loan and deposit balances, and revenues. Also, a strong capital position supported the company’s results. However, elevated expenses and margin contraction were headwinds. Further, a drastic increase in provision for credit losses due to application of CECL and the impacts of coronavirus was a major offsetting factor.

After considering certain non-recurring items, net income available to common shareholders was $126.9 million compared with $111.1 million reported in the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Revenues were up 21.6% year over year to $519.8 million in the first quarter. Also, the top line beat the Zacks Consensus Estimate of $498.2 million.

Net interest income, on a fully taxable basis, totaled $403.7 million, up 18.7% year over year. The rise was mainly due to higher earning assets. Nevertheless, net interest margin contracted 8 basis points (bps) to 3.12%.

Non-interest income rose 30.9% year over year to $123.8 million. Rise in almost all components of income led to the upside.

Non-interest expenses jumped 15.5% on a year-over-year basis to $320.1 million. Increase in all components, except for other expenses, led to the rise.

Efficiency ratio was 54% compared with 57.3% in the prior-year quarter. A decline in the ratio indicates improved profitability.

As of Mar 31, 2020, total loans were $44.3 billion, up 1.6% from the prior quarter. Also, total deposits grew 2.6% sequentially to $44.7 billion.

Credit Quality Deteriorates

As of Mar 31, 2020, non-performing assets were $261.8 million, up 24.6% year over year. Ratio of non-performing assets to total originated loans remained stable at 0.54%.

Also, net loan charge-offs more than doubled year over year to $10.6 million. Net loan charge-offs as a percentage of average total loans were 0.1% on an annualized basis, up 4 bps. Provision for loan losses was $33.5 million compared with $5.6 million in the year-ago quarter.

Capital Position and Profitability Ratios

As of Mar 31, 2020, total risk-based capital ratio decreased to 11.3% from 12.4% recorded a year ago. Tangible equity ratio was 7.4%, down from 7.7%.

Return on average tangible stockholders’ equity was 11.8%, down from the prior-year quarter’s 13%. Return on average assets of 0.89% declined from 0.96% as of Mar 31, 2020.

Our Viewpoint

People’s United remains well-positioned for revenue improvement through continued loan growth. Further, its robust balance sheet position is expected to support inorganic expansion, going forward. However, escalating non-interest expenses are expected to restrict bottom-line expansion. Also, lower interest rates and coronavirus-induced economic slowdown remain major near-term concerns.

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. Price, Consensus and EPS Surprise

People's United Financial, Inc. price-consensus-eps-surprise-chart | People's United Financial, Inc. Quote

Currently, People’s United carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Huntington Bancshares’ HBAN first-quarter 2020 earnings per share of 3 cents lagged the Zacks Consensus Estimate of 12 cents amid the coronavirus crisis. The bottom-line figure was 91% lower than the prior-year quarter’s reported number.

Texas Capital Bancshares Inc. TCBI reported adjusted loss per share of 11 cents in first-quarter 2020, lagging the Zacks Consensus Estimate for earnings of 94 cents. The reported figure excluded certain noteworthy items such as the impacts of the MSR impairment charges and merger-related expenses.

Navient Corporation NAVI reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.

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