UMB (UMBF) Down 12.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for UMB Financial (UMBF). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UMB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
UMB Financial's Q2 Earnings Miss on Revenues Decline
UMB Financial’s second-quarter 2023 operating earnings per share of $1.93 missed the Zacks Consensus Estimate of $1.99. Also, the bottom line declined 31.8% from the prior-year quarter’s $2.83.
Results were affected by a decline in revenues, contraction of NIM and a rise in expenses. Nonetheless, increasing loan balances offered some support.
UMB Financial reported GAAP net income of $90.1 million or $1.85 per share in the second quarter. This was down from $137.6 million or $2.83 per share recorded a year ago.
Revenues Decline, Costs Up
Total revenues were $370.3 million, down 9.1% year over year. Further, the top line missed the Zacks Consensus Estimate of $374.6 million.
NII on an FTE basis was $232.2 million, reflecting a marginal increase from the prior-year quarter. Growth in average loans and higher interest rates mainly led to this upside. On an FTE basis, NIM contracted to 2.44% from the prior-year quarter’s 2.60%.
Non-interest income was $138.1 million, down 21.7%. The fall was caused by lower trading and investment banking income, and a decline in net investment securities gains. These were partially offset by an increase in trust and securities processing, and brokerage fees.
Non-interest expenses were $240.7 million, up 12.4%. Increased salaries and employee benefit outlays, processing fees, supplies and services costs, bankcard expenditures, amortization of other intangible assets and regulatory expenses primarily resulted in this upside.
The efficiency ratio increased to 65.59% from the prior-year quarter’s 53.08%. An increase in efficiency ratio indicates a decrease in profitability.
As of Jun 30, 2023, average loans and leases were $22.26 billion, up 4.3% from the sequential quarter’s level. However, average deposits declined marginally to $31.47 billion as of Jun 30, 2023.
Credit Quality: Mixed Bag
The ratio of net charge-offs to average loans was nil in the reported quarter, down 62 basis points from the year-ago quarter. Moreover, provision for credit losses was $13 million compared with $13.4 million in the prior-year quarter.
However, total non-accrual and restructured loans were $19.3 million, rising 6.8%.
Capital & Profitability Ratios Decline
As of Jun 30, 2023, the Tier 1 risk-based capital ratio was 10.65% compared with 11.44% as of Jun 30, 2022. The Tier 1 leverage ratio was 8.16% compared with 8.17% as of Jun 30, 2022. The total risk-based capital ratio was 12.59% compared with 13% in the year-ago quarter.
Return on average assets at the quarter’s end was 0.90% compared with the year-ago quarter’s 1.47%. Additionally, operating return on average equity was 13.08% compared with 20.84% witnessed in the prior-year quarter.
Outlook 2023
Management anticipates mid-single-digit growth in NII.
The effective tax rate is anticipated to be between 17% and 19%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.54% due to these changes.
VGM Scores
At this time, UMB has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise UMB has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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UMB Financial Corporation (UMBF) : Free Stock Analysis Report
