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UMB Financial (UMBF) Q2 Earnings Beat on Higher Revenues

Zacks Equity Research
·5 min read

UMB Financial UMBF reported second-quarter 2020 net operating income of $1.33 per share, which easily surpassed the Zacks Consensus Estimate of 32 cents. The reported figure also compares favorably with the prior-year quarter’s earnings of $1.17.

Higher revenues, aided by rising loans balance along with rise in fee income, was the key positive. However, higher provisions on the coronavirus scare and contraction of net interest margin were undermining factors.

Including certain non-recurring items, the company reported a net income of $60.5 million or $1.26 per share for the second quarter compared with $57 million or $1.16 per share recorded in the prior-year quarter.

Revenues Rise, Loan & Deposit Balance Improve, Costs Up

Total revenues for the June-ended quarter were $298.7 million, up 9.9% year over year. Also, the revenue figure surpassed the Zacks Consensus Estimate of $295.3 million.

Net interest income came in at $178.2 million, reflecting an increase of 7.1% from the year-ago quarter. Growth in average loans and interest-earning assets mainly led to this upside, partly offset by reduced loan yields due to low interest rates. Net Interest Margin (NIM) contracted 40 basis points (bps) to 2.79% from the prior-year quarter reported figure.

Non-interest income totaled $120.5 million, up 14.3% year over year. The upside mainly resulted from higher trading and investment banking income, trust and securities processing, and other income, partly muted by lower service charges on deposit accounts, bankcard fees and brokerage fees.

Non-interest expenses (GAAP basis) were $208.5 million, up 7.8% from the year-ago figure. Expenses for the quarter included $4 million in non-recurring compensation and other costs tied to the COVID-19 response.

Efficiency ratio (GAAP basis) decreased to 70.2% from the prior-year quarter’s 70.32%. Adjusted efficiency ratio was 68.76%, down from the year-earlier quarter’s 70.19%. A fall in efficiency ratio indicates a rise in profitability.

As of Jun 30, 2020, average loans and leases were $15.1 billion, up 10.9% sequentially. Additionally, average deposits climbed 9.3% from the prior-quarter end to $22.8 billion.

Credit Quality: A Mixed Bag

Total non-accrual and restructured loans were $82.2 million, up 54% year over year. Further, provision for loan losses was $21.5 million, up 95.5% from the year-earlier quarter on the rising coronavirus concerns. Yet, the ratio of net charge-offs to average loans was 0.15% in the reported quarter, down 25 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Jun 30, 2020, Tier 1 risk-based capital ratio was 11.92% compared with 12.65% as of Jun 30, 2019. Also, total risk-based capital ratio was 13.17% compared with 13.63% at the end of the prior-year quarter. The Tier 1 leverage ratio was 8.35% compared with 9.69% as of Jun 30, 2019.

Adjusted return on average assets at the quarter’s end was 0.91%, down from the year-ago quarter’s 0.99%. Additionally, adjusted return on average equity was 9.44% compared with 9.51% witnessed in the prior-year quarter.

Conclusion

UMB Financial put up an impressive performance in the April-June quarter. Soaring loan balances will likely be a driving factor. Furthermore, the company’s efficiency ratio has been decent, which signals better profitability in the long run.

Nonetheless, higher provisions amid the coronavirus concerns might depress the bottom line further. Also, margin pressure from low rates remains a headwind. In addition, intense competition from other FinTech companies and online service providers is concerning.

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

Performance of Other Banks

TCF Financial Corporation TCF reported second-quarter 2020 adjusted earnings per share of 54 cents, beating the Zacks Consensus Estimate of 47 cents. However, the figure declined 5.3% from the prior quarter.

Bank of Hawaii Corporation BOH delivered an earnings surprise of 3.2% in second-quarter 2020. Earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 95 cents. However, the bottom line compares unfavorably with $1.40 reported in the prior-year quarter.

Webster Financial WBS reported adjusted earnings per share of 61 cents in second-quarter 2020, beating the Zacks Consensus Estimate of 54 cents. The reported figure excluded discrete negative adjustment related to customer derivatives.

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