Raymond James: Wintrust Financial's Impressive Q1 Overshadowed By Noise

Wintrust Financial Corp WTFC reported first-quarter EPS at $1.52, in-line with consensus expectations. Excluding negative MSR valuation adjustments, the quarterly EPS would have meaningfully beaten expectations, backed by higher non-interest income and lower operating expenses.

The Analyst

Raymond James’ David Long maintains a Strong Buy rating on Wintrust Financial.

The Thesis

Wintrust Financial recognized a negative MSR valuation adjustment of $8.7 million in the first quarter, which had an adverse impact of 12 cents per share on the EPS, Long said.

The positives in the quarter included an equity securities gain of $1.4 million and a forex remeasurement gain of $0.5 million.

The company’s NIM (net interest margin) expanded 9bps sequentially and was ahead of the consensus estimate. Trust and asset management fees were also higher than expected, Long noted.

Wintrust Financial recorded deposit growth of 2.7 percent, driven by strong wealth management and money market deposit growth. The company was able to control employee expenses and professional fees, which resulted in lower-than-expected operating expenses for the quarter.

Net interest income came in higher than Street projections. Although mortgage banking disappointed, the lower rates bode well for mortgage volume through the rest of 2019, the analyst said.

Long believes there’s room for upward revisions to the Street’s EPS estimate for 2019, to reflect expectations of NIM expansion, strong deposit growth, acceleration in mortgage volume and controlled operating expenses.

Price Action

Shares of Wintrust Financial traded around $75.54 Tuesday afternoon.