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Washington Federal (WAFD) Q4 Earnings Meet, Revenues Beat

Zacks Equity Research

Washington Federal’s WAFD fourth-quarter fiscal 2019 (ended Sep 30) earnings came in at 66 cents per share, in line with the Zacks Consensus Estimate. The figure also reflects year-over-year growth of 6.5%.

Results benefited from a rise in revenues, decent growth in loan and deposit balances, and provision benefits. However, higher expense and lower interest rates were the undermining factors.

Net income for the quarter increased 1.6% year over year to $52.4 million.

For fiscal 2019, earnings of $2.61 per share were up 8.8% year over year, and matched the consensus estimate. Net income grew 3.1% to $210.3 million.

Revenues & Costs Increase

Net revenues for the reported quarter came in at $136.6 million, up 3.9% from the year-ago quarter. The figure marginally beat the Zacks Consensus Estimate of $136.2 million.  

For fiscal 2019, net revenues were $543.4 million, up 5.3%. Also, the top line surpassed the consensus estimate of $539.8 million.

Net interest income was $120.2 million, up nearly 1% from the year-earlier quarter. However, net interest margin declined 14 basis points (bps) to 3.12%.

Total other income of $16.5 million grew 34.4% from the prior-year quarter. This upside was mainly driven by increase in other income and loan fee income.

Operating expenses were up 4.2% from the prior-year quarter to $72.5 million. Higher compensation and benefit, occupancy, information technology and other expenses led to this upswing.

The company’s efficiency ratio was 53.08%, up from 52.94% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.

At the end of the fiscal fourth quarter, return on average common equity was 10.32%, up from 10.29% witnessed at the end of the prior-year quarter. Return on average assets was 1.26%, down from 1.31%.

Loans & Deposits Rise

As of Sep 30, 2019, net loans receivables amounted to $11.9 billion, up from $11.5 billion recorded on Sep 30, 2018. Also, customer deposit accounts were $12 billion, up from $11.4 billion.

Credit Quality Improves

As of Sep 30, 2019, the ratio of non-performing assets to total assets was 0.27%, down 17 bps year over year. Furthermore, the allowance for loan losses and reserve for unfunded commitments were 1.04% of gross loans outstanding, down from 1.06% recorded on Sep 30, 2018.

Additionally, release for loan losses was $1.9 million during the quarter against $5.5 million recorded a year ago.

Share Repurchase Update

During fiscal 2019, Washington Federal repurchased 4.1 million shares at average price of $30.46 per share.

Our View

Washington Federal is well poised to grow organically, supported by continued rise in loan balances. Also, its solid balance sheet position and impressive credit quality will support financials. However, persistently rising expenses are expected to hamper the company’s bottom-line growth.

Washington Federal, Inc. Price, Consensus and EPS Surprise

 

Washington Federal, Inc. Price, Consensus and EPS Surprise

Washington Federal, Inc. price-consensus-eps-surprise-chart | Washington Federal, Inc. Quote

Currently, Washington Federal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Banks

Prosperity Bancshares, Inc. PB and BankUnited, Inc. BKU are scheduled to announce third-quarter 2019 results on Oct 23, while Associated Banc-Corp ASB is set to report on Oct 24.

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