UMB Financial (UMBF) Q3 Earnings Beat Estimates, Revenues Miss
UMB Financial’s UMBF third-quarter 2023 operating earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.76. Also, the bottom line increased 11% from the prior-year quarter’s $2.83.
Results were affected by a decline in revenues, a contraction of the net interest margin (NIM) and a rise in expenses. Nonetheless, increasing loan balances offered some support.
UMBF reported GAAP net income of $96.5 million in the third quarter, up 9.7% year over year.
Revenues Decline, Costs Rise
Total revenues were $362.16 million, down 1.7% year over year. Further, the top line missed the Zacks Consensus Estimate of $363.77 million.
Net interest income (NII) on an FTE basis was $228.8 million, reflecting a decline of 4.6% from the prior-year quarter. On an FTE basis, NIM contracted to 2.43% from the prior-year quarter’s 2.76%.
Non-interest income was $133.3 million, up 3.5% year over year. The rise was driven by an increase in trust and securities processing, and service charges on deposit accounts. These were partially offset by a decrease in trading and investment banking income.
Non-interest expenses were $231.4 million, up marginally year over year. Increased processing fees, supplies and services costs, bankcard expenditure, the amortization of other intangible assets, and regulatory expenses primarily led to this upside.
The efficiency ratio increased to 64.51% from the prior-year quarter’s 63.58%. An increase in efficiency ratio indicates a decrease in profitability.
As of Sep 30, 2023, average loans and leases were $22.75 billion, up 2.5% from the sequential quarter’s level. However, average deposits declined marginally to $31.33 billion as of Sep 30, 2023.
Credit Quality Improves
The ratio of net charge-offs to average loans was 0.08% in the reported quarter, up from 0.02% in the year-ago quarter.
Nonetheless, the provision for credit losses was $4.97 million compared with $22 million in the prior-year quarter. Also, total non-accrual and restructured loans were $17.04 million, down 14%.
Capital Ratios Decline, Profitability Ratios Improve
As of Sep 30, 2023, the Tier 1 risk-based capital ratio was 10.77% compared with 11.18% as of Sep 30, 2022. The Tier 1 leverage ratio was 8.55% compared with 8.66% as of Sep 30, 2022. The total risk-based capital ratio was 12.68% compared with 13.13% in the year-ago quarter.
Return on average assets at the quarter’s end was 0.97% compared with the year-ago quarter’s 0.96%. Additionally, operating return on average equity was 13.50% compared with the 12.94% witnessed in the prior-year quarter.
Our Take
UMBF’s efforts to diversify its non-interest income sources to reduce exposure to interest rates are likely to support revenues in the quarters ahead. However, mounting expenses are major near-term concerns.
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
Associated Banc-Corp ASB reported third-quarter 2023 earnings of 53 cents per share, which met the Zacks Consensus Estimate. The bottom line declined 14.5% from the prior-year quarter.
In the reported quarter, ASB recorded a decline in NII and non-interest income. Also, expenses increased marginally, which, along with higher provisions, was a negative. However, a sequential rise in loan balances aided the results to some extent.
Bank OZK’s OZK third-quarter 2023 earnings per share of $1.49 beat the Zacks Consensus Estimate of $1.44. The bottom line reflects a rise of 38% from the year-earlier quarter.
Results were positively impacted by an improvement in NII, driven by higher rates and robust loan and deposit balances. However, rising expenses, a decline in non-interest income and an increase in provision for credit losses were concerning.
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