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Earnings at Webster Financial (WBS) grew more than 21% in the second quarter from a year earlier, as the Waterbury, Conn., company managed to add loans and transaction deposits.
July 13 -
Regions Financial has unveiled a new line of Visa credit cards, following its repurchase of its card portfolio from Bank of America's FIA Services last summer.
July 12 -
Businesses continue to deposit fund in banks as safety trumps yield as an investment priority. The move continues to cause bankers headaches as the funds weigh down balance sheet returns.
July 10 -
As Bank of America and other large banks try to dispose of unwanted credit card assets, they are fueling a slow revival in card portfolio M&A — and creating opportunities for smaller banks to get back into the issuing business.
August 15
Those who expected stories of commercial loan growth during second-quarter conference calls should also expect warnings that such momentum will likely be short-lived.
Most analysts expect to hear about a continued rise in commercial lending, but renewed concerns about the global economy, the upcoming election, health care costs and taxes have spooked businesses.
Business loan "demand is extremely weak," says Rusty Cloutier, the president and chief executive of MidSouth Bancorp in Lafayette, La. "Businesses have to start dealing with 'ObamaCare', and a lot of [them] are talking about layoffs."
Cloutier says that one client recently told him that it was cutting up to a fifth of its staff to compensate for an estimated $6 million cost tied to health care reform.
"Most bankers have noted small and [midsize] businesses have been like a deer in the headlights" lately, says Michael Rose, an analyst at Raymond James. "There's probably some pent up demand but with the uncertainty … they're hesitant to expand."
Rose is projecting "sluggish" commercial loan growth for the next two or three quarters.
For now, commercial and industrial loans have been on a wobbly incline, based on Federal Reserve data. Most analysts think the second quarter will show a continuation of such growth.
"I'm expecting loan balances to rise again and, in many cases, be incrementally better than the prior quarter," says Chris Marinac, an analyst at FIG Partners. Still, "there's clearly a high degree of uncertainty in the business and operating environment for commercial customers."
Marinac says there may be a "pullback" in loan growth in the third quarter. Such concerns are surfacing in early conference calls with bank executives.
Executives at Washington Federal expressed caution last Thursday, despite the company's ninth straight quarter of higher earnings.
"Management and the board expect further improvement … in the near term but recognize the formidable challenges presented longer-term by extraordinarily low interest rates and muddled market conditions," said Roy Whitehead, the Seattle company's president and chief executive.
Webster Financial faced several questions about its net interest margin during its quarterly call Friday, even though the Waterbury, Conn., company
Webster was relatively comfortable with the minor margin shrinkage. "We continue to succeed in partially offsetting declining yields on earning assets by reducing liability costs," James Smith, Webster's chairman and chief executive, said during a conference call.
Most banks have
"The biggest concern most investors have is where the margins go from here," says Mark Fitzgibbon, an analyst at Sandler O'Neill. "It could be both a near- and long-term concern depending on whether the rates stay at current levels and how long the economy stays in this limbo."
If the healthiest banks are concerned, it should give reason for others to pause and reconsider their independence.
"This might make merger activity pick up a little bit," Cloutier says. MidSouth continues to look for acquisition targets along the Gulf Coast.
"It absolutely will prompt more consolidation," Fitzgibbon says. "It's shocking to me that we haven't had more already."
Whole bank deals remain spotty as bankers hesitate to sell for less than book value. To compensate for a weak C&I market and margin pressure, more banks are buying credit card portfolios or have expanded beyond business loans.
"Some banks are getting into indirect auto lending and pushing into credit cards," Rose says. "It's great that bankers are looking at earning assets, but it also signals to me that organic growth is just not there yet."
Last week Regions Financial
"We're still seeing the demand in small business and commercial middle market to be tough," David Turner, Regions' chief financial officer, said during at a June 13 presentation at a conference in New York hosted by Morgan Stanley. "There's a tremendous amount of uncertainty in the marketplace … and we need that uncertainty removed."
Still, Fitzgibbon says it is better to be back at the "normal" concerns of margins compared to the fears about deteriorating asset quality and depleted capital that once rattled investors not so long ago. "It feels more normal to be worried about margins," he said. "It's a more typical risk for this business."
