Shares of Webster Financial WBS climbed 2.2% after the company delivered a positive earnings surprise of 4.3% in third-quarter 2018. Adjusted earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 94 cents.
Results reflected growth in revenues with support from higher loans and improving interest margin. Also, the company's strong capital position was a tailwind. However, higher non-interest expenses remained an undermining factor
After considering several non-recurring items, the company reported earnings applicable to common shareholders of $97.5 million or $1.06 per share, up from $62.4 million or 67 cents in the prior-year quarter. Revenue Rise Offsets Higher Expenses, Loans Increase
Webster Financial's total revenues in the quarter rose 13.5% from the year-ago quarter's figure to $302.7 million. Also, the metric exceeded the Zacks Consensus Estimate of $299.3 million.
Net interest income grew 14.7% year over year to $230.4 million. Moreover, net interest margin expanded 31 basis points (bps) from the year-earlier quarter's level to 3.61%.
Non-interest income was around $72.3 million, up nearly 8.9% year over year. This upside was primarily prompted by a rise in almost all components of non-interest income. These were however, partially countered by a fall in mortgage banking revenues.
Non-interest expenses of $178.8 million escalated 10.5% from the number recorded in the comparable quarter last year. The figure includes $2.9 million charge related to an accrual for deposit insurance assessments before 2018. Excluding this, costs rose 8.7% year over year on higher compensation and benefits expenses, other costs and technology plus equipment related costs.
Efficiency ratio (on a non-GAAP basis) came in at 57.41% compared with 59.18% as of Sep 30, 2017. A lower ratio indicates improved profitability.
The company's total loans and leases as of Sep 30 2018 were $18.3 billion, up 1.6% sequentially. However, total deposits increased 3.1% from the prior quarter to $22 billion. Credit Quality: A Mixed Bag
Total nonperforming assets were $158 million, down 7% from $169 million in the year-ago period. Further, allowance for loan losses represented 1.16% of total loans as of Sep 30, 2018, in line with the Sep 30, 2017 figure. Also, the ratio of net charge-offs to annualized average loans came in at 0.13%, down 5 bps year over year.
However, the provision for loan and lease losses rose 3.4% from the year-ago quarter's count to $10.5 million. Improved Capital & Profitability Ratios
As of Sep 30, 2018, Tier 1 risk-based capital ratio was 11.96% compared with 11.65% as of Sep 30, 2017. Also, total risk-based capital ratio came in at 13.44% compared with 13.17% in the prior-year quarter. Tangible common equity ratio was 7.86%, up from 7.55% as of Sep 30, 2017.
Return on average assets was 1.47% in the reported quarter compared with 0.98% in the year-ago period. As of Sep 30, 2018, return on average common stockholders' equity came in at 14.74%, up from 9.95% as of Sep 30, 2017. Our Viewpoint
Webster Financial put up a decent performance in third-quarter 2018, reflected by improved revenues and a strong loan balance. Its solid capital position will boost growth initiatives. Also, its efforts to expand HSA Bank segment bode well for the long term. However, increase in expenses and provisions deter bottom-line growth to some extent.
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
M&T Bank Corporation MTB reported net operating earnings of $3.56 per share in third-quarter 2018, surpassing the Zacks Consensus Estimate of $3.35. Also, the bottom line improved 59% year over year.
BancorpSouth BXS delivered third-quarter 2018 net operating earnings of 56 cents per share, in line with the Zacks Consensus Estimate. Moreover, the bottom line compares favorably with the year-ago quarter's earnings of 43 cents.
Riding on higher revenues and lower provisions, U.S. Bancorp's USB third-quarter 2018 earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, results came ahead of the prior-year quarter's earnings of 88 cents.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report M&T Bank Corporation (MTB): Free Stock Analysis Report U.S. Bancorp (USB): Free Stock Analysis Report Webster Financial Corporation (WBS): Free Stock Analysis Report BancorpSouth Bank (BXS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research