People's United Reports As Expected - Analyst Blog
October 19 2012 - 4:10AM
Zacks
Regional bank, People's
United Financial Inc. (PBCT) reported its third-quarter
2012 operating earnings per share of 19 cents, in line with the
Zacks Consensus Estimate. Earnings compared unfavorably with 20
cents per share, reported in the prior quarter.
Higher non-interest expenses and elevated provision for loan losses
were the dampeners for the quarter. However, higher revenue aided
by improved non-interest income acted as a positive.
Operating income was reported at $64.4 million compared with $67.2
million in the prior quarter. Including after-tax one-time charges
of $2.2 million, net income came in at $62.2 million or 18 cents
per share in the third quarter of 2012.
Performance in Detail
Total revenue, net of expense reported was $316.2 million in the
quarter, up 1.6% sequentially, due to higher non-interest income.
Moreover, results surpassed the Zacks Consensus Estimate of $315.0
million.
Net interest income reported by the company was $234.8 million,
slightly down on a sequential basis. Moreover, in the ongoing
historically low interest rate environment and with an asset
sensitive balance sheet, operating net interest margin decreased 6
basis points sequentially to 3.82%. Reduction in loan yields was
partly offset by lower funding costs.
Non-interest income was $81.4 million, up 7.5% sequentially, mainly
attributed to a rise in bank service charges and higher other
non-interest income. These increases were, however, partially
offset by lower brokerage commissions.
Non-interest expenses augmented 1.6% sequentially to $208.9
million. The increase in expenses was attributable to escalation in
compensation and benefits expenses and elevated occupancy and
equipment expenses.
Credit Metrics
Overall, People’s United’s credit quality reported a mixed bag
during the quarter. Provision for loan losses was recorded at $15.1
million, up 42.5% from $10.6 million in the prior quarter.
As of September 30, 2012, People's United's nonperforming loans
totaled $202.0 million, down 14.6% from $236.6 million in the last
quarter. Moreover, the ratio of nonperforming loans to total loans
declined to 1.45% from 1.52% as of June 30, 2012.
Nonperforming assets (excluding acquired non-performing loans)
totaled $294.0 million as of September 30, 2012, approximately in
line with the prior quarter. However, nonperforming assets were
1.59% of total loans, REO and repossessed assets, down from 1.67%
in the previous quarter.
Moreover, net loan charge-offs totaled $9.4 million, down 30.4%
from $13.5 million in the prior quarter. Net loan charge-offs as a
percentage of average loans on an annualized basis were 0.18%, down
8 basis points sequentially.
Capital Ratios
Operating return on average assets was 0.91% and return on average
tangible stockholders' equity was 8.6%, descending from 0.97% and
8.9%, respectively, in the prior quarter. Moreover, as of
September 30, 2012, People's United’s tangible equity ratio
plummeted to 11.2% from 11.5% in the prior quarter.
Capital Deployment Update
Concurrent with the press release, the board of People's United
declared quarterly dividend of 16 cents per share. The dividend
will be paid on November 15, 2012 to shareholders of record as of
November 1, 2012. Considering the closing stock price on October
17, the dividend yield came in at 5.3%.
During the quarter, People’s United repurchased 4.5 million shares
of common stock valued at $54 million. Under the current
share repurchase authorization, 4.5 million shares remain available
for buyback.
Our Viewpoint
Overall, People's United is trying to overcome the slow economic
recovery through opportunistic acquisitions. Going forward, growth
in deposits is expected to boost the company’s financial results.
In addition, capital deployment activity will definitely boost
investors’ confidence. Yet, the recent regulatory issues remain the
major area of concern.
People's United currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
also maintain our ‘Neutral’ recommendation on the stock.
One of People’s United’s peers, Hudson City Bancorp
Inc. (HCBK) will report its third-quarter 2012 earnings on
October 24, 2012.
HUDSON CITY BCP (HCBK): Free Stock Analysis Report
PEOPLES UTD FIN (PBCT): Free Stock Analysis Report
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