Webster Financial Upped to Strong Buy - Analyst Blog

On Aug 24, 2013, Zacks Investment Research upgraded Webster Financial Corp. (WBS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Webster Financial has been witnessing rising earnings estimates on the back of strong second-quarter results. Moreover, the company has an expected long-term earnings growth rate of 4.0%.

On Jul 12, Webster Financial reported second-quarter earnings of 48 cents per share, surpassing the Zacks Consensus Estimate by a penny. Moreover, it surpassed the prior-quarter earnings of 44 cents. Better-than-expected results were driven by top-line growth and a decline in operating expenses. Further, improved asset quality and capital ratios were the other highlights for the quarter.

Webster Financial's net interest income came in at $147.0 million, up 1.9% from the prior quarter. Moreover, non-interest income came in at $52.3 million, up 10.3% sequentially. Further, total noninterest expenses decreased 2.8% from the previous quarter to $123.6 million.

Webster Financial's asset quality showed an improvement. Nonperforming assets were $190.5 million as of Jun 30, 2013, down 6.3% from the prior quarter. As of Jun 30, 2013, allowance for loan losses as a percentage of total loans stood at 1.33%, down 7 basis points (bps) from the prior quarter.

Capital ratios also showed improvement. As of Jun 30, 2013, Tier 1 risk-based capital ratio was 12.90% compared with 12.75% as of Mar 31, 2013. Moreover, total risk-based capital stood at 12.90% as of Jun 30, 2013 compared with 12.75% as of Mar 31, 2013.

Over the last 60 days, the Zacks Consensus Estimate for 2013 went up by 3.2% to $1.91 per share. Moreover, for 2014, the Zacks Consensus Estimate increased 5.9% to $1.97 per share over the same time frame.

Other Stocks to Consider

Other stocks that are also worth considering in the same industry include Eagle Bancorp, Inc. (EGBN), Metro Bancorp, Inc. (METR) and OFG Bancorp (OFG). All these stocks carry a Zacks Rank #1 (Strong Buy).