People's United (PBCT) Q4 Earnings Beat, Revenues Up Y/Y

People's United Financial Inc. PBCT reported fourth-quarter 2019 operating earnings of 37 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents. Also, the bottom line increased 2.8% year over year.

Fourth-quarter results reflect improvement in loan and deposit balances, and revenues. Also, a strong capital position and decline in provisions supported the company’s results. However, elevated expenses and margin contraction were major drags.

Net income available to common shareholders was $134 million compared with $129.4 million reported in the prior-year quarter.

For 2019, operating earnings was $1.39 per share compared with the prior year’s figure of $1.31. The bottom line outpaced the consensus estimate of $1.35. Net income grew 11.5% to $506.3 million.

Revenue Growth Offsets Higher Expenses

Revenues were up 20.3% year over year to $506.9 million in the fourth quarter. Also, the top line beat the Zacks Consensus Estimate of $487.8 million.

For 2019, net revenues were $1.8 billion, up 15%. Also, it matched the consensus estimate.

Net interest income, on a fully-taxable basis, totaled $390.3 million, up 15% year over year. Nevertheless, net interest margin contracted 3 basis points (bps) to 3.14%.

Non-interest income surged 40% year over year to $124.2 million. Rise in almost all components of income led to this upside.

Non-interest expenses jumped 24% on a year-over-year basis to $325.7 million. Increase in all components except regulatory assessments and operating lease expense led to higher expenses.

Efficiency ratio was 53.7% compared with 55.1% in the prior-year quarter. A decline in the ratio indicates improved profitability.

As of Dec 31, 2019, total loans were $43.6 billion, up 12.4% from the prior quarter. Also, total deposits grew 13% sequentially to $43.6 billion.

Credit Quality Improves

As of Dec 31, 2019, non-performing assets were $180.4 million, down 2.9% year over year. Ratio of non-performing assets to total originated loans contracted 6 bps to 0.55%.

Also, net loan charge-offs declined 10.7% year over year to $6.7 million. Net loan charge-offs as a percentage of average total loans were 0.06% on an annualized basis, down 3 bps. Provision for loan losses was $7.3 million, down 26.3%.

Capital Position and Profitability Ratios

As of Dec 31, 2019, total risk-based capital ratio decreased to 12.0% from 12.5% recorded a year ago. Tangible equity ratio was 8.0%, up from 7.6%.

Return on average tangible stockholders’ equity was 12.8%, down from the prior-year quarter’s 14.9%. Return on average assets of 0.98% declined from 1.11%.

Our Viewpoint

People’s United displayed impressive fourth-quarter results. Strong capital position along with improving credit quality is likely to further aid the company’s performance. Also, continuous rise in loans and deposits reflect a robust balance sheet position, which is expected to support its inorganic expansion, going forward. Moreover, the bank acquired United Financial Bancorp, Inc. in the reported quarter, which is anticipated to be accretive to earnings by 7 cents per share based on fully phased-in cost savings. However, escalating non-interest expenses are expected to restrict bottom-line expansion.

People's United Financial, Inc. Price, Consensus and EPS Surprise

People's United Financial, Inc. price-consensus-eps-surprise-chart | People's United Financial, Inc. Quote

Zacks Rank

Currently, People’s United carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Peers

Associated Banc-Corp ASB, M&T Bank Corporation MTB and BankUnited, Inc. BKU are scheduled to announce fourth-quarter 2019 results on Jan 23.

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