Webster Financial (WBS) Up 2.8% on Q2 Earnings Beat, NII Rise
Webster Financial WBS reported second-quarter 2023 adjusted earnings per share of $1.50, which surpassed the Zacks Consensus Estimate of $1.47. The figure excludes 18 cents of charges related to the merger with Sterling Bancorp on Jan 31, 2022.
Shares of the company have gained 2.8% following the better-than-expected results.
Due to higher rates and loan growth, net interest income (NII) increased. Also, a decline in expenses drove the efficiency ratio. However, lower non-interest income created a hindrance.
WBS reported net income applicable to common shareholders of $230.8 million, up 30% from the prior-year quarter.
Revenues Increase & Expenses Decline
Webster Financial’s total revenues in the quarter climbed 10.8% year over year to $673.2 million. However, the top line lagged the Zacks Consensus Estimate of $690.9 million.
The NII increased 20% year over year to $583.8 million. The net interest margin was 3.35%, up 7 basis points.
Non-interest income was $89.4 million, down 26.1% year over year. The primary reason for this fall was a decrease in deposit service fees, loan and lease-related fees, and wealth and investment services income.
Non-interest expenses were $344.1 million, down 3.9% from the year-ago quarter. A decrease in compensation and benefits, and occupancy drove the fall.
The efficiency ratio (on a non-GAAP basis) was 42.2% compared with 45.25% in the prior-year quarter. A lower ratio indicates higher profitability.
Webster Financial’s total loans and leases as of Jun 30, 2023, were $51.62 billion, up 1.4% sequentially. Also, total deposits were up 6.2% from the previous quarter to $58.74 billion.
Credit Quality Mixed
Total non-performing assets were $222.2 million as of Jun 30, 2023, down 11.2% from the year-ago quarter’s level. In addition, allowance for loan losses represented 1.22% of the total loans, having shrunk 3 bps on a year-over-year basis.
However, the company recorded a provision for credit losses of $31.49 million compared with $12.24 million seen in the prior-year quarter. Also, the ratio of net charge-offs to annualized average loans came in at 0.16% compared with the 0.9% reported in the year-ago quarter.
Capital Ratios Decrease, Profitability Ratios Improve
As of Jun 30, 2023, the Tier 1 risk-based capital ratio was 11.17% compared with 11.65% as of Jun 30, 2022. Additionally, the total risk-based capital ratio was 13.26% compared with the prior-year quarter’s 13.91%.
Return on average assets was 1.23% in the reported quarter, up from 1.10% in the prior-year quarter. As of Jun 30, 2023, the return on average common stockholders' equity was 11.38%, up from 9.09% in the prior-year quarter. However, the tangible common equity ratio was 7.23%, down from 7.68%.
Our Viewpoint
Webster Financial’s results reflect strong growth in NII, backed by higher rates and loans. The improving profitability ratios were other positives.
Webster Financial Corporation Price, Consensus and EPS Surprise
Webster Financial Corporation price-consensus-eps-surprise-chart | Webster Financial Corporation Quote
Webster 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
First Horizon Corporation’s FHN second-quarter 2023 adjusted earnings per share (excluding notable items) of 39 cents surpassed the Zacks Consensus Estimate. The figure also improved 14.7% year over year.
FHN’s results benefited from higher NII and non-interest income. Also, improving loan and deposit balances were tailwinds. However, higher provisions and rising expenses were the undermining factors.
Zions Bancorporation’s ZION second-quarter 2023 net earnings per share of $1.11 lagged the Zacks Consensus Estimate of $1.13. The bottom line decreased 14% from the year-ago quarter.
ZION’s results were adversely impacted by a decline in NII, a rise in non-interest expenses and higher provisions. However, higher rates, decent loan demand and a rise in deposit balances were the major positives. Nevertheless, non-interest income increased for the quarter.
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Webster Financial Corporation (WBS) : Free Stock Analysis Report
