Webster Financial Q1 Earnings Miss on Higher Provisions & Expenses

Webster Financial WBS reported first-quarter 2025 earnings per share (EPS) of $1.30, which lagged the Zacks Consensus Estimate of $1.38. Nonetheless, the reported figure compared favorably with EPS of $1.23 reported a year ago.

Results were affected by higher non-interest expenses and provisions, along with lower non-interest income. Nonetheless, a rise in net interest income (NII) and higher loan and deposit balances supported the results to some extent.

Net income applicable to common shareholders (GAAP basis) was $220.4 million, up 4.9% from the prior-year quarter.

Webster Financial’s Revenues Rise & Expenses Increase Y/Y

WBS’ total revenues in the quarter increased 5.7% year over year to $704.8 million. However, the top line missed the Zacks Consensus Estimate of $714.9 million.

NII increased 7.8% year over year to $612.2 million. The net interest margin was 3.48%, down 7 basis points (bps).

Non-interest income was $92.6 million, down 6.8% year over year. The fall was due to a decline in almost all the components except the cash surrender value of life insurance policies and the net gain on the sale of investment securities.

Non-interest expenses were $343.6 million, up 2.3% from the year-ago quarter. The rise primarily stemmed from an increase in almost all the components except marketing expenses, deposit insurance costs and other expenses.

The efficiency ratio was 45.79% compared with 45.25% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.

WBS’ Loans & Deposit Balance Rises Sequentially

As of March 31, 2025, total loans and leases increased 1% on a sequential basis to $53.1 billion. Further, total deposits increased 1.3% from the prior quarter to $65.6 billion.

Webster Financial’s Credit Quality Deteriorates

Total non-performing assets were $564.7 million as of March 31, 2025, up significantly from $289.3 million recorded in the year-ago quarter. Allowance for loan losses was 1.34% of the total loans, which increased from 1.26% in the first quarter of 2024.

The ratio of net charge-offs to annualized average loans was 0.42%, up from 0.29% in the year-ago period.

The provision for credit losses was $77.5 million, up 70.3% year over year.

WBS’ Capital Ratios Improve

As of March 31, 2025, the Tier 1 risk-based capital ratio was 11.77%, which increased from 11.08% as of March 31, 2024. The total risk-based capital ratio was 13.98%, up from the prior-year quarter’s 13.21%.

Webster Financial’s Profitability Ratios Mixed

Return on average assets was 1.15%, which remained stable compared with the prior-year quarter. At the end of the first quarter, the return on average common stockholders' equity was 9.9%, which fell from 10.01% in the prior-year quarter.

Our Viewpoint on WBS

Rising NII and non-interest income will boost Webster Financial's top line. Strategic buyouts have fortified its balance sheet, while deposit and loan growth will continue aiding its financials. However, its deteriorating credit quality and elevated expenses remain a near-term concern.

Webster Financial Corporation Price, Consensus and EPS Surprise

Webster Financial Corporation price-consensus-eps-surprise-chart | Webster Financial Corporation Quote

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.

Performance of Other Banks

East West Bancorp, Inc.’s EWBC first-quarter 2025 adjusted EPS of $2.09 beat the Zacks Consensus Estimate of $2.05. Moreover, the bottom line increased marginally from the prior-year quarter’s level. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

EWBC’s results were primarily aided by an increase in NII and non-interest income. Also, loan balances increased sequentially in the quarter. However, higher provisions and non-interest expenses alongside lower deposits were headwinds.

Capital One’s COF first-quarter 2025 adjusted earnings of $4.06 per share handily surpassed the Zacks Consensus Estimate of $3.66. The bottom line also compared favorably with $3.21 in the prior-year quarter.

COF’s results benefited from higher NII and non-interest income. Also, provisions declined during the quarter. However, the increase in expenses and lower loan balance were undermining factors.

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