Webster Financial Q3 Earnings Miss Estimates, Revenues Decline Y/Y

Webster Financial WBS reported adjusted third-quarter 2024 earnings per share (EPS) of $1.34, which missed Zacks Consensus Estimate of $1.35. This compares unfavorably with earnings of $1.55 reported a year ago.

Find the latest earnings estimates and surprises on the Zacks Earnings Calendar.

Results were affected by a fall in non-interest income and higher provisions. However, lower expenses and increased net interest income (NII) offered some support.

Net income applicable to common shareholders (GAAP basis) was $188.8 million, down 15.1% from the prior-year quarter.

Webster Financial’s Revenues & Expenses Decline Y/Y

WBS’ total revenues in the quarter dropped 4.4% year over year to $647.6 million. The top line lagged the Zacks Consensus Estimate by 3.8%.

NII increased marginally year over year to $589.9 million. The net interest margin was 3.36%, down 13 basis points (bps).

Non-interest income was $57.7 million, down 36.1% year over year. This includes a $19.6-million net loss on the sale of investment securities and a $16-million loss on the exit of non-core operations, including the write-off of a related customer intangible. 

Excluding this, non-interest income rose 3.2% from the previous-year quarter to $93.3 million. The increase is primarily attributable to the addition of Ametros and higher investment services income.

Non-interest expenses were $349 million, down 3.8% from the year-ago quarter. This includes a net $20.6 million related to restructuring costs and other adjustments, partially offset by a benefit on the FDIC special assessment, compared with a net $61.6 million of Sterling merger charges a year ago.

Excluding these charges, non-interest expenses would have been $390 million, up 7.8% year over year. The increase is primarily attributable to the addition of Ametros and related intangible amortization expenses, along with investments in technology.

The efficiency ratio was 45.49% compared with 41.75% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.

WBS’ Loans & Deposit Balance Rises Sequentially

As of Sept. 30, 2024, total loans and leases increased marginally on a sequential basis to $51.9 billion. However, total deposits increased 3.6% from the prior quarter to $64.5 billion.

Webster Financial’s Credit Quality Deteriorates

Total non-performing assets were $427.3 million as of Sept. 30, 2024, up 95.6% from the year-ago quarter. Allowance for loan losses was 1.32% of the total loans, which increased from 1.27% in the third quarter of 2023.

The ratio of net charge-offs to annualized average loans was 0.27%, up from 0.23% year over year.

The provision for credit losses was $54 million, up 47.9% year over year.

WBS’ Capital Ratios Improve

As of Sept. 30, 2024, the Tier 1 risk-based capital ratio was 11.23%, which increased from 11.12% as of Sept. 30, 2023. The total risk-based capital ratio was 14.03%, up from the prior-year quarter’s 13.79%.

Webster Financial’s Profitability Ratios Worsen

Return on average assets was 1.01%, which declined from 1.23% in the prior-year quarter. At the end of the third quarter, the return on average common stockholders' equity was 8.67%, which fell from 11% in the prior-year quarter.

Our Viewpoint on WBS

A decline in non-interest income, accompanied by higher provisions for credit losses, was a major drawback for Webster Financial. However, lower expenses and a rise in NII, along with an increase in the loans and deposit balance, offered support to its financials. The company’s inorganic expansion efforts continue to aid its growth.

Webster Financial Corporation Price, Consensus and EPS Surprise

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.

Performances of Other Banks

Synovus Financial Corp. SNV reported third-quarter 2024 adjusted earnings per share of $1.23, which surpassed the Zacks Consensus Estimate of $1.09. The reported figure compared favorably with earnings of 84 cents a year ago.

Results benefited from strong growth in non-interest revenues (NIR), a fall in expenses and provisions for credit losses. Also, an improving loans and deposit balance was a tailwind. However, a decline in NII and a rise in non-performing loans were major headwinds. 

First Horizon Corporation’s FHN third-quarter 2024 adjusted earnings per share (excluding notable items) of 42 cents surpassed the Zacks Consensus Estimate of 38 cents. Moreover, the figure increased 55.6% year over year. 

FHN’s results benefited from a rise in NII and non-interest income. Also, an increase in deposits and lower provisions were other positives. However, elevated expenses and a fall in loan balances were major headwinds.

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Synovus Financial Corp. (SNV): Free Stock Analysis Report
 
First Horizon Corporation (FHN): Free Stock Analysis Report
 
Webster Financial Corporation (WBS): Free Stock Analysis Report

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