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UMB Financial (UMBF) Q3 Earnings Beat on Revenue Strength

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UMB Financial UMBF reported third-quarter 2020 net operating income of $1.59 per share, surpassing the Zacks Consensus Estimate of $1.01. The reported figure also compares favorably with the prior-year quarter’s earnings of $1.27.

Elevated revenues, aided by rising loans and deposit balances supported the company’s performance. However, higher provisions and expenses were major drags. Further, reduction in net interest margin was an undermining factor.

Including certain non-recurring items, the company reported a net income of $73.1 million or $1.52 per share for the third quarter, up from the net income of $62.4 million or $1.27 per share recorded in the prior-year period.

Increase in Revenues, Loans & Deposits Balance, Costs Up

Total revenues (fully tax-equivalent) for the July-September quarter came in at $304.2 million, up 9.4% year over year. The revenue figure also outpaced the Zacks Consensus Estimate of $290.7 million.

Net interest income came in at $191.2 million, reflecting an increase of 9.6% from the year-ago quarter. Growth in average loans and investment securities mainly led to this upside, driven by organic loan growth and the company’s participation in the Paycheck Protection Program (PPP). Net Interest Margin (NIM) contracted 36 basis points (bps) to 2.73% from the prior-year quarter reported tally.

Non-interest income totaled $113 million, up 9.1% year over year. This upsurge mainly resulted from higher trading and investment banking income, trust and securities processing and other income, partly muted by lower bankcard fees, service charges on deposit accounts and brokerage fees, along with reduced net gains on sales of securities available for sale.

Non-interest expenses (GAAP basis) came in at $198 million, up 3.4% from the year-ago tally, mainly due to higher salaries and employee benefits, along with equipment expenses. These were partly negated by lower marketing and business development, legal and consulting along with other expenses.

Efficiency ratio (GAAP basis) decreased to 66.14% from the prior-year quarter’s 70.7%. Adjusted efficiency ratio was 64.69%, down from the year-earlier quarter’s 70.63%. A fall in efficiency ratio indicates rise in profitability.

As of Sep 30, 2020, average loans and leases were $15.7 billion, up 4% sequentially. Additionally, average deposits climbed 5.7% from the prior-quarter end to $24.1 billion.

Credit Quality: A Concern

During the reported quarter, credit metrics deteriorated. Total non-accrual and restructured loans came in at $93.7 million, up 30.5% year over year. Further, provision for loan losses more than doubled to $16 million from the year-earlier quarter. Also, the ratio of net charge-offs to average loans was 0.13% in the reported quarter, up 6 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Sep 30, 2020, Tier 1 risk-based capital ratio was 11.93% compared with 12.53% as of Sep 30, 2019. Also, total risk-based capital ratio was 14.17% compared with the 13.51% witnessed at the end of the prior-year quarter. The Tier 1 leverage ratio was 8.19% compared with 9.62% as of Sep 30, 2019.

Adjusted return on average assets at the quarter’s end was negative 1.03%, down from the year-ago quarter’s 1.04%. Additionally, return on average equity was 10.7% compared with the 9.72% witnessed in the prior-year quarter.

Capital Deployment Update

Concurrent with the earnings release, the company’s board of directors announced an increased common stock dividend of 32 cents per share, up 3.2% from the prior pay out.

Conclusion

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

Nonetheless, higher provisions amid the coronavirus concerns might depress the company’s revenues. Margin pressure and low fee income remain headwinds. In addition, intense competition from other FinTech companies and online service providers is another concern.
 

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

Bank of New York Mellon Corporation’s BK third-quarter 2020 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in 8.4% lower than the prior-year quarter’s level. Results primarily benefited from growth in asset balance. Nonetheless, slightly lower revenues and rise in expenses were undermining factors.

First Republic Bank FRC delivered a positive earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter. Results were supported by an increase in NII and fee income. Yet, higher expenses and elevated provisions were offsetting factors.

Regions Financial RF reported third-quarter 2020 adjusted earnings of 49 cents per share, beating the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents. Results were driven by higher revenues on increases in both NII and fee income. Furthermore, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Nevertheless, higher provisions for credit losses and rise in expenses were undermining factors.

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