UMB Financial Corporation (UMBF) recently reported another solid quarter marked by growing non-interest income and solid credit quality.
Earnings per share beat the Zacks Consensus Estimate by 31%, prompting analysts to revise their estimates significantly higher. It is a Zacks #2 Rank (Buy) stock.
The company also pays a dividend that yields a solid 1.9%. Unlike many of its peers, UMB did not cut its dividend during the financial crisis.
Company Description
UMB Financial is a financial services company primarily offering banking and asset management services. It is headquartered in Kansas City, Missouri and operates approximately 130 banking centers in 7 states.
First Quarter Results
On April 26, UMB Financial reported Q1 earnings per share of 76 cents, crushing the Zacks Consensus Estimate of 58 cents. It was an 18% increase over the same quarter in 2010.
Total revenue was up 15% year-over-year driven by a 25% increase in non-interest income. Non-interest income accounted for 58% of total revenue in the quarter.
Net interest income rose 3.5% year-over-year to $78.4 million as interest expense on deposits fell 31%. The net interest margin, which is essentially the spread between the interest it receives from loans and what it pays out on deposits, slid 29 basis points to 2.90%.
The provision for loan losses declined 15% as non-performing loans fell from 0.59% to 0.41% of total loans. UMB’s non-performing loans are well below the industry median of 4.0%, reflecting its strong credit quality.
Outlook
Analysts unanimously revised their full year estimates higher off the strong quarter. The Zacks Consensus Estimate for 2011 is $2.61, up from $2.43 before the earnings surprise. This represents solid 15% growth over 2010 EPS.
The 2012 consensus estimate also moved higher, from $2.73 to $2.87 per share. This equates to 10% annual growth.
Consensus estimates have been moving significantly higher over the last several months, which is a very bullish trend. Check out the movement in 2011 and 2012 consensus estimates in the company’s Price & Consensus chart:
It is a Zacks #2 Rank (Buy) stock.
Solid Dividend
Unlike many financial services companies, UMB did not cut its dividend during the financial crisis of 2008-2009. In fact, the company actually raised it twice in 2008 and then again in 2009:
UMB’s payout ratio is a relatively low 33%, leaving plenty of room for more dividends in the future. It currently yields 1.9%.
Reasonable Valuation
UMB is also one of the few financial stocks whose stock price is higher now than it was 5 years ago:
Valuation is still reasonable too, with shares trading at 15.5x forward 12-month earnings, in-line with the industry average, and a discount to its 10-year median of 19.0x.
UMB Financial was founded in 1913 and has a market cap of $1.7 billion.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
UMB FINL CORP (UMBF): Free Stock Analysis Report
Zacks Investment Research
