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Hancock Whitney's (HWC) Q2 Earnings Beat, Provisions Decline

Hancock Whitney Corporation 's HWC second-quarter 2018 adjusted earnings per share of 96 cents surpassed the Zacks Consensus Estimate by a cent. Also, the figure represents an improvement of nearly 41.2% year over year.

Results benefited from an improvement in net interest income, and decline in expenses and provisions. Further, loan growth remained strong. However, an increase in non-performing assets and lower net interest margin were the downside.

After considering the impact of several non-recurring items, net income for the quarter came in at $71.2 million or 82 cents per share, up from $52.3 million or 60 cents per share reported in the prior-year quarter.

Revenues Improve, Expenses Decline

Hancock's net revenues were $280.4 million, up 4.9% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $276.8 million.

Net interest income grew 5.9% year over year to $211.6 million. Net interest margin (NIM), on a tax-equivalent basis, came in at 3.40%, contracting 3 basis points (bps) year over year.

Non-interest income totaled $68.8 million, reflecting an increase of 2% from the year-ago quarter. However, if one-time amortization of FDIC loss share receivable is excluded from the prior-year figure, the current-quarter income is in line with that of the year-ago quarter.

Total operating expenses decreased 2.5% year over year to $168.6 million. The decline was due to fall in almost all cost components.

Credit Quality: Mixed Bag

Net charge-offs from the non-covered loan portfolio was 0.11% of average total loans, edging down from 0.13% in the year-ago quarter. Also, provision for loan losses declined 40.5% year over year to roughly $8.9 million.

However, total non-performing assets increased 20.1% year over year to $416.5 million.

Strong Balance Sheet, Higher Profitability Ratios and Mixed Capital Ratios

As of Jun 30, 2018, total loans were $19.4 billion, up from $19.1 billion recorded at the prior-quarter end. Furthermore, total deposits decreased 1.1% from the prior quarter to $22.2 billion.

Return on average assets was 1.04% at the end of the quarter, up from 0.79% in the prior-year quarter. Moreover, return on average common equity was 9.81% compared with 7.52% at the end of the year-ago quarter.

As of Jun 30, 2018, Tier 1 leverage ratio was 8.65%, down from 8.21% in the year-ago figure. However, Tier 1 risk-based capital ratio was 10.49%, increasing from 10.01% as of Jun 30, 2017.

Outlook

Management continues to expect charge-offs from energy-related credits to be roughly $95 million.

Moreover, the company expects to have a strong capital position, along with sufficient reserves.

Our Viewpoint

Hancock remains well poised for revenue growth in the future, given its continued improvement in loans. Also, the company's declining operating expenses will likely drive bottom-line growth. Nevertheless, pressure on net interest margin remains a major concern. The company's exposure toward risky loan portfolios also makes us apprehensive.

Hancock Whitney Corporation Price, Consensus and EPS Surprise

Hancock Whitney Corporation Price, Consensus and EPS Surprise | Hancock Whitney Corporation Quote

At present, Hancock carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other Southeast banks, Regions Financial Corporation RF is slated to release second-quarter 2018 results on Jul 20, while Synovus Financial Corp. SNV and Carolina Financial Corporation CARO are scheduled to report their quarterly numbers on Jul 24.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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