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UMB Financial (UMBF) Q1 Earnings Beat, Revenues Up Y/Y

UMB Financial UMBF reported first-quarter 2022 net operating income per share of $2.17, surpassing the Zacks Consensus Estimate of $1.65. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.91.

Results were supported by higher revenues driven by an increase in net interest income (“NII”) and fee income. A solid balance sheet position was another positive. Increased expenses and deteriorating credit quality were headwinds. Capital ratios witnessed a decline.

Revenues and Costs Up, Balance Sheet Strong

First-quarter 2022 total revenues (on a fully tax-equivalent basis or FTE) were $340.4 million, up 10% year over year. The top line beat the Zacks Consensus Estimate of $332.5 million.

NII, on an FTE basis, was $216.8 million, reflecting an increase of 8% from the year-ago quarter’s figure. Growth in average securities and increased average loans mainly led to this upside. These increases were driven by organic loan growth and excess liquidity. However, On a FTE basis, the net interest margin (“NIM”) contracted to 2.35% from the prior-year quarter’s 2.59%.

Non-interest income totaled $123.7 million, increasing 13.6% year over year. The rise mainly resulted from higher income from all components except trading and investment banking, as well as insurance fees and commissions.

Non-interest expenses were $214.8 million, up 6.9% from the year-ago quarter’s level, mainly due to increase in all components except equipment, supplies and services, and amortization of other intangible assets

The efficiency ratio was 63.98% compared with the prior-year quarter’s 66.46%. A decline in the efficiency ratio indicates an increase in profitability.

As of Mar 31, 2022, average loans and leases were $17.4 billion, up 4% from the sequential quarter’s level. This included paycheck protection program loan balances.

Average deposits climbed 3% from the prior quarter’s level to $32.6 billion as of Mar 31, 2022.

Credit Quality Deteriorates

The ratio of net charge-offs to total average loans was 0.20% in the reported quarter, up 7 basis points from the year-ago quarter’s level. The recoveries for credit losses were $6.5 million compared with $7.5 million in the prior-year quarter.

Moreover, total non-accrual and restructured loans were $110.4 million, surging 44% year over year.

Capital Ratios Decline, Profitability Ratios Mixed

As of Mar 31, 2022, the Tier 1 risk-based capital ratio was 11.81% compared with 12.25% as of Mar 31, 2021. The total risk-based capital ratio was 13.55% compared with 14.28% in the year-ago quarter. Tier 1 leverage ratio was 7.53% at first-quarter end compared with 8.08% as of Mar 31, 2021.

Adjusted return on average assets at the quarter’s end was 1.10% compared with the year-ago quarter’s 1.14%. Nonetheless, operating return on average equity was 14.67% compared with 12.58% witnessed in the prior-year quarter.

Dividend Update

UMB Financial’s board of directors announced a common stock quarterly dividend of 37 cents per share. The dividend will be paid out on Jul 1, to its shareholders of record as of Jun 10, 2022.

The board of directors also approved a share repurchase plan of up to two million shares of the company’s common stock, valid till the 2023 annual meeting of the company’s shareholders.

Conclusion

UMB Financial put up an impressive performance in the first quarter. The company’s efforts to diversify its non-interest income sources to reduce exposure to interest rates and rising deposits will support revenues in the quarters ahead. Further, strong balance sheet position and increase in revenues during the quarter are tailwinds.

UMB Financial Corporation Price, Consensus and EPS Surprise

UMB Financial Corporation Price, Consensus and EPS Surprise
UMB Financial Corporation Price, Consensus and EPS Surprise

UMB Financial Corporation price-consensus-eps-surprise-chart | UMB Financial Corporation Quote

UMB Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Horizon National Corporation’s FHN first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation MTB reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII and NIM, and a rise in expenses were the key undermining factors.

Fifth Third Bancorp FITB reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline, primarily due to a fall in fee income. Margin contraction and capital position deterioration played spoilsports for FITB.


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