On Jun 6, 2013, we reiterated our long-term recommendation on
Washington Federal Inc
) at Neutral based on its continued capital deployment
activities, balance sheet restructuring plans and strategic
acquisitions. However, we remain concerned about the company's
considerable exposure to real estate markets.
FIRST PACTRUST (BANC): Free Stock Analysis
KEARNY FINL CP (KRNY): Get Free Report
MUTUALFIRST FIN (MFSF): Free Stock Analysis
WASH FEDL INC (WAFD): Free Stock Analysis
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Why the Neutral Stance?
Washington Federal's fiscal second-quarter 2013 earnings (ended
Mar 31) came in at $0.34 per share, marginally surpassing the
Zacks Consensus Estimate by a penny. Better-than-expected
earnings were primarily driven by declining credit costs,
partially offset by higher operating expenses and lower top line.
Moreover, improvement in assets quality and enhanced capital
ratios were the tailwinds for the quarter.
Following the second-quarter 2013 earnings (ended Mar 31), the
Zacks Consensus Estimate for 2013 went up by a penny to $1.33
over the last 60 days. However, for 2014, the Zacks Consensus
Estimate went down by 2.2% to $1.31 per share over the same time
frame. Hence, the stock currently has a Zacks Rank #3 (Hold).
Washington Federal's continuous loan and deposit growth, improved
credit quality along with initiatives to improve its balance
sheet are expected to prove beneficial for the company going
forward. Moreover, over the past few years, Washington Federal
has considerably increased its market share through strategic
On the other hand, though the company is enjoying the benefits of
lower interest rates, the anticipated improvement in the
interest-rate environment is likely to ruin its efforts to
strengthen interest margin through deposit re-pricing.
Moreover, Washington Federal's investment in traditional assets
like prime residential mortgage loans and AAA-rated
mortgage-backed securities are funded largely by customer
deposits with maturities of 1 year or less. These are expected to
be marred by rising interest rates, which might also compress the
margin between fixed asset returns and variable funding costs,
Other Banks to Consider
Some better performing banks include
First Pactrust Bancorp, Inc
Kearny Financial Corp
Mutualfirst Financial Inc
). All these carry a Zacks Rank #1 (Strong Buy).