Umpqua Executing Well, But Momentum Is Slowing

All good things come to an end, and many of the tailwinds that have aided Umpqua’s (NASDAQ:UMPQ) earnings momentum are starting to fade. The bank still has positive asset sensitivity, a strong deposit base, and attractive loan growth opportunities, as well as growth opportunities in fee-generating businesses, but loan demand is starting to ease off and deposit costs are going to head higher.

Still, I like the fundamentals at Umpqua and I like the outlook for the combined post-merger Umpqua and Columbia Bank (COLB), and that deal should close in the first quarter of 2023. I still believe in a mid-single-digit post-deal core earnings growth rate, and that still supports a double-digit long-term annualized return at today’s valuation.

 

To keep reading, please follow this link: 

Umpqua Executing Well, But Momentum Is Slowing

Umpqua Marking Time Ahead Of A Major Merger

When I last wrote about Umpqua (NASDAQ:UMPQ) in February, I said that while I liked the long-term potential of the bank after its pending combination with Columbia (COLB), the short-term set-up wasn't so great. Between pressures on the mortgage banking business, non-exceptional asset sensitivity, and limited expense reduction and capital return options pending deal close, I was concerned that the shares may not be set to outperform, and so it has been, as the roughly 13% decline in the share price has modestly underperformed the regional bank group (by around 5%).

I still like the long-term prospects for the bank. Mergers of equals (or MOEs) always carry above-average execution risk, but the synergy and cross-selling opportunities seem legitimate and likely to build value. Not only will the combination extend both banks' operating footprints, but it will also create complementary product offerings in commercial lending as well as enhanced operating scale. At a point where banks are still generally out of favor, I like what I see with double-digit long-term annualized return potential at today's price.

 

Read the full article: 

Umpqua Marking Time Ahead Of A Major Merger

Umpqua In Good Shape Long Term, But The Pending MOE Will Test Investor Patience

 

Umpqua (UMPQ) is a good bank in good long-term shape but in a tough near-term set-up. It’s no exaggeration to say that the Street is quite skeptical about large mergers of equals (or MOEs) and has generally taken a “show me” stance on the purported revenue and cost synergies; not an altogether unfair position given that some MOEs in the past have encountered outsized cultural integration issues and struggled to come through on the expected benefits.

I think the investment case around Umpqua right now revolves around your patience and time horizon. I think there’s double-digit long-term total annualized return potential at today’s price, but I’ve seen stocks undergoing MOEs stagnate for frustratingly long periods of time. If you’re a patient investor that doesn’t care as much about near-term performance, this may be a good opportunity, but do be aware that the Street may take some time to warm up to the long-term benefits of the deal and/or will likely do so on an unpredictable schedule.

 

Read the full article here: 

Umpqua In Good Shape Long Term, But The Pending MOE Will Test Investor Patience

Umpqua Powers Through Short-Term Mortgage Banking Pressures

 

Just when you think you have the Street figured out, it throws you for a loop. I’ve long liked Western bank Umpqua Holdings (UMPQ), and when I last wrote about the stock, I said that I saw an appealing double-digit annualized long-term potential return for shareholders. I also expected significant near-term earnings pressure from lower mortgage banking, and thought that would spook the Street when it has been obsessed with near-term banking metrics.

Turns out, at least in this case, the Street took the mortgage banking weakness in stride and stayed focused on the big picture. Although mortgage banking has been hit hard, Umpqua shares have risen about 25% since that last article, handily beating the average regional bank over that time (although the post-earnings run has fueled about half of that).

I like where Umpqua is sitting today. The mortgage banking issue is known and in the numbers, and the loan growth outlook is better, while NIM was actually higher than expected here. With a strong customer service focus and above-average growth potential, combined with a long-term potential return in the high single-digits and modest undervaluation in the short term, I still think this is a quality holding and still a borderline buy for longer-term investors.

 

Click here to continue: 

Umpqua Powers Through Short-Term Mortgage Banking Pressures

Steady Performance At Umpqua, With Some Possible Upside From Opex

Having lagged a bit leading into my last piece, Umpqua (NASDAQ:UMPQ) came back strongly, rising as much as 14% before declining into and after earnings, following the sector lower as earnings reports and guidance have failed to live up to investor hopes and expectations. Still, the shares reflect a little more of the underlying value I saw, and management continues to execute relatively well against their targets.

Looking to 2020 and beyond, my feelings are a little mixed. Fundamentally, I think this is a solid bank with a solid core deposit base. I also think it’s a bank with growth potential across the West Coast, particularly on the commercial side. The “mixed” part is that, while I see ongoing opportunities to execute better on costs, management has come up short so far, and I’m likewise a little concerned about the below-expectation trend in loan growth. While I see upside towards $20, these shares are not quite so undervalued as before and management needs to execute better on cost initiatives.

Read the full article here:
Steady Performance At Umpqua, With Some Possible Upside From Opex

Umpqua Punished For Short-Term Challenges, But The Long-Term Opportunity Remains Attractive

Although Umpqua (UMPQ) remains one of my favorite mid-cap banks, there's no question that the company's performance since my last write-up has been poor, with the shares down about 11% and trailing its regional peer group by about 15% to 20%. That's definitely not the performance you should expect from a good bank, but I see a disconnect here - even though Umpqua has been hit hard on much weaker than expected spread margins, the pre-provision operating performance hasn't been that bad.

I've reduced my near-term earnings expectations fairly substantially as the year has gone on, but I still believe Umpqua can generate high single-digit long-term core earnings growth, and I think Umpqua will be a longer-term winner in a sector where regional and community banks are going to come under increasing pressure from larger super-regional banks that can leverage a larger base of business to compete more aggressively on price and invest huge sums in IT. I guess the current sentiment makes this a contrarian call, but with a 5% yield and what looks like an unfairly low valuation, this is a name I'm considering adding now.

Read the full article:
Umpqua Punished For Short-Term Challenges, But The Long-Term Opportunity Remains Attractive

Encouraging, If Choppy, Progress At Umpqua

Orgeon’s Umpqua Holdings (UMPQ) has generally been well-liked by investors, which has often meant a less-appealing valuation compared to many peers. Between that popularity, a less asset-sensitive balance sheet than many peers, and general optimism on the company’s efficiency initiative, the shares really haven’t lagged its regional banking peers all that much over the last six or 12 months.

Looking at fourth quarter results, Umpqua seems to be going into 2019 with some decent momentum and attractive prospects for spread improvement on delayed repricings, as well as further cost-reduction benefits from the NextGen process. Although I believe Umpqua is undervalued on both a long-term earnings basis (assuming high single-digit growth) and near-term ROTE, the degree of undervaluation is less than for many banks in its peer group.

Read more here:
Encouraging, If Choppy, Progress At Umpqua

Self-Improvement And Growth Initiatives Making A Difference For Umpqua

Umpqua’s (UMPQ) management change at the start of 2017 has made a difference for this West Coast bank, as the company has moved fairly aggressively to address two of my biggest concerns in late 2016 – a high level of expenses and a lack of clear growth drivers. A new focus on “upper-middle-market” lending should drive profitable C&I lending growth, while Umpqua Next Gen could result in some meaningful expense (a mid-single-digit percentage of 2017 expenses).

Since my last update, Umpqua shares have done a little better than the regional averages and better than peers/rivals like Washington Federal (WAFD) and PacWest (PACW), though not as well as SVB (SIVB) or East West (EWBC). At this point, I believe Umpqua shares are a little undervalued, provided an expectation of double-digit long-term core earnings growth is reasonable.

Read more here:
Self-Improvement And Growth Initiatives Making A Difference For Umpqua

Washington Federal Hoping A New Model Can Drive More Growth

Until relatively recently, Washington Federal (NASDAQ:WAFD) was pretty much a thrift - residential mortgages made up a large majority of the loan book, and the company financed those loans with a funding mix that skewed heavily toward savings accounts and CDs. In recent years, though, this multi-state Western regional bank has tried to become more like larger peers such as Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), and Umpqua (NASDAQ:UMPQ), with a turn toward more commercial lending.

I don't like how Washington Federal has been losing deposit share in many states, nor the already-high loan/deposit ratio. As the bank is not very asset-sensitive, I worry that the near-term drivers for near-term growth are relatively limited. I do believe that management is making a good call in diversifying its loan book, but I'd like to see more progress on accumulating lower-cost deposits and a willingness to look a little harder for better uses of capital.

Read more here:
Washington Federal Hoping A New Model Can Drive More Growth

Umpqua Seems Short Of Growth Drivers

Oregon's Umpqua (NASDAQ:UMPQ) is something of a case-in-point as to why I'm reluctant to overpay for stocks (and bank stocks in particular). When I last wrote about this high-quality bank back in 2014, I thought the shares looked expensive. Since that time, the shares are actually down about 5% - rare for most bank stocks and all the worse when compared to the performances of regional rivals like East West (NASDAQ:EWBC), Washington Federal (NASDAQ:WAFD) and Pacific Continental (NASDAQ:PCBK).

What's worse is that even after this run of underperformance, the shares still don't look all that cheap. Not only is Umpqua not all that asset-sensitive, it also lacks real leverage in more than a handful of major markets. Add in a loan book that is overweighted to commercial real estate and multi-family residential lending, an elevated cost structure (which is liable to be tough to tame) and weakening yields, and it's a tough near-term outlook. While there is definitely room for improvement, Umpqua may find it hard to go much above 10% ROE in the foreseeable future, and that limits the value proposition today.

Read the full article here:
Umpqua Seems Short Of Growth Drivers

Seeking Alpha: Sterling Strengthens The Business, But Umpqua Not Exactly Cheap

There's likely always going to be a place for local/regional banks that focus on customer service and deep relationships as opposed to cross-selling and cost efficiency. Umpqua Holdings (UMPQ) is one such bank in the Pacific Northwest, where it has the #4 position in Oregon behind Bank Of America (BAC), U.S. Bancorp (USB), and Wells Fargo (WFC) and the #7 position in Washington state.

Umpqua has a lot going for it, including an uncommon retail-oriented branch network and strong growth opportunities in leasing. The acquisition of Sterling not only gives the company more scale in its core operating areas, but also the prospect of synergies and cost leverage and a more balanced loan book. The biggest problem is that the Street is already pretty favorably disposed toward Umpqua and the shares seem to factor in some pretty bullish expectations already.

Continue reading here:
Sterling Strengthens The Business, But Umpqua Not Exactly Cheap

Investopedia: Patience Will Pay At Wells Fargo

Another quarter is in the books, and things do not look dramatically different for America's largest banks. While granting that earnings momentum is still lacking, and a huge slug of bad debt and foreclosed homes is an albatross around the industry's neck, this still remains one of the most undervalued industries in the market. Barring a belief that the U.S. economy will never recover or that the government will regulate the industry into the ground, patient investors should consider accumulating and holding quality names like Wells Fargo (NYSE:WFC). 

Second Quarter Results Without Much Sizzle  
Unlike tech stocks this quarter, which seem to produce exciting results whether good or bad, bank stocks are producing pretty uniformly boring results. Wells Fargo is hardly different in that regard. 


To read the full article at Investopedia, follow the link:
Patience Will Pay At Wells Fargo (WFC, PNC, C, BAC, ZION, UMPQ, FCNCA)

A Quick Review Of Zions Earnings

Zions Bancorp (Nasdaq: ZION) produced a scary quarter for June. Not scary in so much as the results were poor (though they were not very good at all), but scary because there are so many different ways to look at them. Depending on what you see as "core" and what adjustments you think are necessary, you can get a very large range of outcomes. I am a sucker for clean statements and easy reporting, so that is not a positive in my book.

Revenue for the quarter was anything from up 1% sequentially to down 7% depending upon how you want to look at it. I will not go into all of the forensic accounting here (unless somebody asks me to), but I think the most accurate peg is "down mid-single digits". Within that, core net interest income fell about 2%.

Expenses were problematic for Zions, particularly those related to REO (that is, bank-owned foreclosed properties). The company did reported lower provisioning for bad debts (lower by almost $40M), but charge-offs were about 30M higher and the NPA (non-performing assets) is still a way-too-high 7%. All in all, net losses were about 12% higher than the first quarter, and the company is unsure if it will make a profit at all this year.

Continuing a theme, loan performance was weak - down about 2% sequentially, with a larger drop in commercial real estate lending. I like the fact that Zions confirmed something I had been thinking for a little while now - namely, that banks are competing more aggressively for high-quality loans. See, banks have been saying that loan demand is weak, but that does not sync with what business owners are saying. So, I happen to believe that Zions came closer to scratching the truth - demand is weak among good borrowers.

I happen to think that there is still a risk that Zions could need more capital, particularly if there is another soft patch in markets like California, Washington, and Texas. Still, for a bank that was seen as a sure-fire goner in the worst of the crisis, I think Zions deserves some credit for hanging in there.

Would I buy Zions shares? No thanks. Even if I estimate that the bank can return to 14% ROEs (and I think that is a *big* "if"), the stock is worth about $25. That is a lot of risk to take for a roughly one-third gain. Given that I think future ROEs will be more in the range of 12%, I am even less interested.

Regional banks are getting thumped right and left today; Zions, Marshall & Ilsley (NYSE: MI), Fifth Third (Nasdaq: FITB), Regions (NYSE: RF), and so on. If I were looking to buy a bank in Zion's neighborhood, I would be more inclined to go big (Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), US Bancorp (NYSE: USB)) or maybe even smaller (Umpqua (Nasdaq: UMPQ)).

Either way, I would leave Zions alone for now.