(By Bala Sheshan) RBC Capital Markets analyst Gerard Cassidy increased his earnings
estimates for Webster Financial Corp. (NYSE:WBS) after the company's
first quarter results.
The brokerage, which maintained its "Sector Perform" rating and $23
price target, lifted its Q2-2012 EPS estimate to $0.45 from $0.42, Q3
estimate to $0.46 from $0.45, Q4 forecast to $0.49 from $0.48, its 2012
estimate to $1.83 from $1.73 and its 2013 forecast to $1.91 from $1.86.
WBS reported core Q1 EPS of $0.43, ahead of Cassidy's $0.38 estimate
and consensus of $0.40. First quarter results were better than his
estimate due to higher growth in average earning assets that led to
higher net interest income, higher than expected wealth and investment
services income and lower than expected non-interest expense.
The analyst's revised earnings estimates reflect the company's
aggressive cost-rationalization strategy in combating continued pressure
on the NIM, and incorporate continued strong loan growth.
interest income of $147 million was 0.9% higher than Cassidy's estimate
and 1.4% higher than the prior quarter as a 3 basis point sequential
decline in the NIM was partially offset by a 2.8% sequential increase in
average earning assets to $17.5 billion.
Non-interest income increased 4.1% from the prior quarter to $44.0
million, 7.1% higher than the analyst's estimate of $41.1 million
primarily due to stronger wealth and investment services fees and higher
gains sale of loans and securities.
Non-interest expense increased 1.0% sequentially to $127.8 million,
and was in line with the analyst's estimate. The company's efficiency
ratio decreased to 65.6% from 65.8% in Q4-2011.
(including accruing TDRs) as a percentage of loans plus OREO declined to
4.27% compared to 4.67% in the prior quarter as lower TDR balances
offset higher new C&I non-accruals.
Total portfolio new non-accrual loans increased to $75.2 million in
Q1-2012 from $58.9 million in the prior quarter driven by a commercial
loan and commercial real estate mortgage. Net charge-offs to average
loans remained consistent at 0.96% (0.95% in Q4-2011).
WBS currently trades at stated book value, which is slightly below
fair value given Cassidy's view that: the company is over-capitalized; a
quarterly dividend increase is likely in the near term to an estimated
$0.08-0.10 per share; and, loan growth trends are positive. He would
expect the shares to trade at 1.1 times to book value which by using
today's book value equates to $23 per share.
WBS closed Wednesday's regular trading down 0.56% at $21.45.