People's United (PBCT) Beats On Q3 Earnings, Revenues Rise

People's United Financial Inc (NASDAQ:PBCT).’s (NYSE:C) third-quarter 2017 operating earnings of 26 cents per share beat the Zacks Consensus Estimate by a cent. The reported figure was up 8.3% year over year.

Higher revenues and lower provisions primarily led to earnings growth. Growth in loan and deposit balances supported the results. However, higher expenses was the undermining factor.

Net income came in at $90.8 million compared with $73.7 million in the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Net revenues, on a fully taxable basis, were up 11.6% year over year to $385.1 million in the quarter.

Net interest income, on a fully taxable basis, totaled $295.8 million, up 16.4% year over year. Further, net interest margin improved 24 basis points (bps) year over year to 3.04%.

Non-interest income dropped to $89.3 million. The rise in investment management fees, cash management fees and bank-owned life insurance was offset by a drop in all other components and resulted in an overall 1.7% year-over-year decline in non-interest income.

Non-interest expenses increased 7.1% on a year-over-year basis to $237.1 million. Rise in all components except operating lease expense and other non-interest expenses lead to a significant increase in expenses.

As of Sep 30, 2017, total loans were $32.4 billion, up 2.5% from the prior quarter. Further, total deposits increased approximately 2.2% to $32.5 billion from the prior quarter.

Credit Quality: A Mixed Bag

As of Sep 30, 2017, non-performing assets were $190.7 million, up 5.9% year over year. Ratio of non-performing loans to total originated loans increased 5 bps from the prior-year quarter to 0.59%. Further, net loan charge-offs increased 79.2% year over year to $4.3 million.

However, provision for loan losses were $5.6 million, down 33.3% year over year.

Stable Capital Position, Profitability Ratios Improves

Capital ratios of People’s United displayed mixed results. As of Sep 30, 2017, total risk-based capital ratio climbed to 12% from 11.5% in the year-ago quarter. However, tangible equity ratio was 7.1%, down from 7.2% in the year-ago quarter.

The company’s profitability ratios improved. Return on average tangible stockholders’ equity was 11.8%, up from 10.7% in the prior-year quarter. Return on average assets of 0.84% rose from 0.73% in the year-ago quarter.

Our Viewpoint

People’s United reported a decent quarter with healthy organic growth. Furthermore, the company is steadily growing through acquisitions, which is likely to continue in the near future, given its strong balance sheet position.

However, escalating non-interest expenses despite initiatives to curb costs are expected to restrict bottom-line expansion in the upcoming quarters.

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

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.

Performance of Other Banks

Citigroup Inc. (NYSE:C) delivered a positive earnings surprise of 7.6% in third-quarter 2017 on prudent expense management. Earnings per share of $1.42 for the quarter easily outpaced the Zacks Consensus Estimate of $1.32. Also, earnings compared favorably with the year-ago figure of $1.24 per share.

The PNC Financial Services Group, Inc. (NYSE:PNC) reported a positive earnings surprise of 1.4% in third-quarter 2017. Earnings per share of $2.16 beat the Zacks Consensus Estimate of $2.13. Moreover, the bottom line reflects a 17.4% increase from the prior-year quarter.

M&T Bank Corporation (NYSE:MTB) reported third-quarter 2017 net operating earnings of $2.24 per share, which lagged the Zacks Consensus Estimate $2.40. However, earnings increased 5.2% on a year-over-year basis.

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