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UMB Financial (UMBF) Reports Q1 Loss on Higher Provisions

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Impacted by higher provisions, UMB Financial UMBF reported first-quarter 2020 net operating loss of 4 cents per share as against the Zacks Consensus Estimate of earnings of 89 cents. The reported figure also compares unfavorably with the prior-year quarter’s earnings of $1.19.

Higher provisions on the heightening coronavirus scare and implementation of CECL was a major drag. Further, reduction in net interest margin was an undermining factor. However, higher revenues, aided by rising loans and deposit balances, and prudent expense management supported the company’s results.

Including certain non-recurring items, the company reported a net loss of $3.4 million or 7 cents per share for the first quarter, down from the net income of $57.7 million or $1.18 per share recorded in the prior-year quarter.

Increase in Revenues, Loans & Deposits Balance, Costs Down

Total revenues for the January-March quarter came in at $272.4 million, marginally up year over year. The revenue figure, however, lagged the Zacks Consensus Estimate of $275.9 million.

Net interest income came in at $173.9 million, reflecting an increase of 6.1% from the year-ago quarter. Growth in average loans and investment securities mainly led to this upside, partly offset by reduced loan yields due to low interest rates. Net Interest Margin (NIM) contracted 23 basis points (bps) to 2.97% from the prior-year quarter reported tally.

Non-interest income totaled $98.4 million, down 8.4% year over year. This decline mainly resulted from lower trading and investment banking income, bankcard fees and other income, partly muted by higher service charges on deposit accounts, trust and securities processing and brokerage fees.

Non-interest expenses (GAAP basis) came in at $188.6 million, down 1.1% from the year-ago tally, mainly due to lower salaries and employee benefits and other expenses, partly negated by higher equipment and processing costs along with elevated amortization of other intangible assets.

Efficiency ratio (GAAP basis) decreased to 68.93% from the prior-year quarter’s 70%. Adjusted efficiency ratio was 68.19%, down from the year-earlier quarter’s 69.78%. A fall in efficiency ratio indicates rise in profitability.

As of Mar 31, 2020, average loans and leases were $13.6 billion, up 3% sequentially. Additionally, average deposits climbed 2% from the prior-quarter end to $20.8 billion.

Credit Quality: A Mixed Bag

Total non-accrual and restructured loans came in at $97 million, up 53.2% year over year. Further, provision for loan losses came in at $88 million, significantly up from the year-earlier quarter on rising coronavirus concerns and due to the implementation of CECL. Yet, the ratio of net charge-offs to average loans was 0.23% in the reported quarter, down 18 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Mar 31, 2020, Tier 1 risk-based capital ratio was 11.90% compared with 12.70% as of Mar 31, 2019. Also, total risk-based capital ratio was 13.12% compared with 13.72% at the end of the prior-year quarter. The Tier 1 leverage ratio was 8.81% compared with 9.65% as of Mar 31, 2019.

Adjusted return on average assets at the quarter’s end was negative 0.03%, down from the year-ago quarter’s 1.03%. Additionally, return on average equity was a negative 0.28% compared with the 10.56% witnessed in the prior-year quarter.

Conclusion

UMB Financial put up a disappointing performance in the March-end quarter. Higher provisions amid the coronavirus concerns might depress the company’s revenues further. Nonetheless, 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.

Nevertheless, 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 #4 (Sell).

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 first-quarter 2020 adjusted earnings per share of 57 cents, beating the Zacks Consensus Estimate of 35 cents. However, the figure plunged 45.2% from the prior quarter.

Synovus Financial SNV recorded first-quarter 2020 adjusted earnings of 21 cents per share, missing the Zacks Consensus Estimate of 31 cents. Also, the reported figure came in 79% lower than the prior-year quarter tally.

Evercore EVR delivered adjusted earnings per share of $1.21 for the January-March quarter, beating the Zacks Consensus Estimate of $1.03. However, results were down 27% from the prior-year quarter’s $1.66 per share.

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Synovus Financial Corp. (SNV) : Free Stock Analysis Report
 
UMB Financial Corporation (UMBF) : Free Stock Analysis Report
 
Evercore Inc (EVR) : Free Stock Analysis Report
 
TCF Financial Corporation (TCF) : Free Stock Analysis Report
 
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