People's United Financial Inc. PBCT reported second-quarter 2019 operating earnings of 34 cents per share, in line with the Zacks Consensus Estimate. The bottom line improved 6.3% year over year.
Elevated expenses and provisions were major drags. However, margin expansion 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 $129.7 million compared with $106.7 million reported in the prior-year quarter.
Revenue Growth Offsets Higher Expenses
Revenues were up 14.7% year over year to $454.4 million in the second quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $448.8 million.
Net interest income, on a fully-taxable basis, totaled $355.4 million, up 15.5% year over year. Further, net interest margin expanded 2 basis points (bps) to 3.12%.
Non-interest income climbed 12% year over year to $106.3 million. Rise in almost all components of income led to this upside. This was partially offset by lower investment management fees and brokerage commissions.
Non-interest expenses jumped 12% on a year-over-year basis to $278.4 million. Rise in mostly all components led to higher expenses.
Efficiency ratio was 55.8% compared with 58.4% recorded in the prior-year quarter. A decrease in the ratio indicates improved profitability.
As of Jun 30, 2019, total loans were $38.6 billion, up 8.6% from the prior quarter. Furthermore, total deposits inched up approximately 7% sequentially to $39.5 billion.
Credit Quality: A Mixed Bag
As of Jun 30, 2019, non-performing assets were $179 million, down 4.3% year over year. Ratio of non-performing loans to total originated loans contracted 4 bps to 0.56%.
However, net loan charge-offs climbed 10% year over year to $4.5 million. Net loan charge-offs as a percentage of average total loans were 0.05% on an annualized basis, down 1 bps. Provision for loan losses came was $7.6 million, up 16.9%.
Strong Capital Position and Profitability Ratios
Capital ratios of People’s United remained strong. As of Jun 30, 2019, total risk-based capital ratio decreased to 12% from 12.5% recorded a year ago. Tangible equity ratio was 7.7%, up from 7.3%.
The company’s profitability ratios were strong as well. Return on average tangible stockholders’ equity was 14.1%, up from the prior-year quarter’s 13.9%. Return on average assets of 1.04% edged up from 1%.
People’s United displayed decent performance in the second quarter. Rise in loans and expansion of margin supported revenue growth. Also, strong capital position remained a tailwind.
Though escalating non-interest expenses are expected to restrict bottom-line expansion in the upcoming quarters, the company is steadily growing via acquisitions. This inorganic growth trend 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-eps-surprise-chart | 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
SunTrust Banks' STI second-quarter 2019 adjusted earnings of $1.44 per share reflect a decline of 3.4% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for earnings for the quarter under review was pegged at $1.46.
BancorpSouth BXS reported second-quarter 2019 net operating earnings of 61 cents per share, which came in line with the Zacks Consensus Estimate. Also, the bottom line increased 8.9% from the prior-year quarter.
Driven by top-line strength, U.S. Bancorp’s USB second-quarter 2019 earnings per share of $1.09 surpassed the Zacks Consensus Estimate of $1.07. Also, the reported figure is up 6.9% from the prior-year quarter.
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