UMB (UMBF) up 11% since last earnings report: can it continue?
A months have passed since UMB Financial’s last earnings report (UMBF). Stocks rose about 11% during that time, outperforming the S&P 500.
Will the recent positive trend continue until its next results release, or is the UMB likely to experience a pullback? Before we dive into how investors and analysts have reacted in recent times, let’s take a quick look at his latest earnings report to better understand the important factors.
UMB Financial Q3 Higher earnings and income, declining loans
UMB Financial’s operating earnings per share of $ 1.95 exceeded Zacks’ consensus estimate of $ 1.81 in the third quarter of 2021. Net income also compares favorably to the $ 1.59 in the quarter. of the previous year.
Higher income, aided by an increase in interest income, supported the performance of the company. Growth in deposits and improved credit quality were other positive elements.
Including some non-recurring items, the company reported net income of $ 94.5 million or $ 1.94 per share, compared to $ 73.1 million or $ 1.52 per share recorded in the year quarter. former.
Income, increase in deposit balance, increase in costs
Total revenue (fully tax-equivalent) was $ 324.2 million, up 6.6% year over year. Revenue exceeded Zacks’ consensus estimate of $ 321.6 million.
The NII was $ 209.8 million, reflecting a 13.8% increase from the prior year quarter. Growth in organic loans, excess liquidity and participation in the paycheck protection program were the main contributors to the increase. The NIM contracted to 2.52% from 2.73% for the quarter a year earlier.
Non-interest income totaled $ 107.9 million, down 4.5% year over year. This decrease is mainly the result of lower income from trading and investment banking, brokerage commissions and losses on investment securities.
Non-interest expense was $ 208.9 million, up 5.5% from the prior year quarter, mainly due to higher processing fees, salary costs and employee benefits and operational losses.
The efficiency ratio decreased to 65.62% from 66.14% in the quarter of the previous year. A decrease in the efficiency ratio indicates an improvement in profitability.
As of September 30, 2021, average loans and leases stood at $ 16.75 billion, down slightly sequentially. Average deposits increased 5.9% from the end of the previous quarter to $ 29.4 billion.
Credit quality improves
The net write-offs to average loans ratio was 0.07% in the current quarter, down 6 basis points from the previous year quarter. The allowance for credit losses was a benefit of $ 5 million versus expenses of $ 16 million recorded in the prior year quarter.
However, total unrecorded and restructured loans stood at $ 96.5 million, up 3% year-on-year.
Mixed capital ratios, profitability improves
As of September 30, 2021, the Tier 1 risk-based capital ratio was 12.26%, compared to 11.93% as of September 30, 2020. The total risk-based capital ratio was 14.17% , remaining stable from one year to the next. The Tier 1 leverage ratio stood at 7.87% compared to 8.19% as of September 30, 2020.
The adjusted return on average assets at the end of the quarter was 1.04% compared to 0.99% in the previous year’s quarter. In addition, the operating return on average equity was 11.97%, compared to 10.70% in the previous year quarter.
For 2021, the tax rate is expected to be between 16% and 18%.
How have the estimates evolved since then?
It turns out that revised estimates have trended upward over the past month.
Currently, UMB has a growth score lower than D, a score with the same score on the momentum front. By following the exact same price, the stock was given a rating of D on the value side, placing it in the bottom 40% for that investment strategy.
Overall, the stock has an overall VGM score of F. If you’re not strategy-focused, this score is the one you should be interested in.
Estimates have trended higher for the stock, and the magnitude of these revisions looks promising. It’s no surprise that the UMB has a Zacks Rank # 2 (Buy). We expect an above-average return on the security over the next few months.
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