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UMB (UMBF) Up 8.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for UMB Financial (UMBF). Shares have added about 8.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UMB due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

UMB Financial Q2 Earnings Top Estimates, Revenues Escalate

UMB Financial 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, were 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, up14.3% year over year. Theupside 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, up7.8% 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 came in at $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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, UMB has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


UMB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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