How are energy investors positioned?
On Wednesday, UBS updated its outlook for U.S. midcap banks, revising earnings estimates and highlighting key performers in the sector. Analysts noted that since the start of bank earnings announcements last week, the SPDR S&P Regional Banking ETF (KRE) has seen a 3% increase. Standout banks included Bank OZK (NASDAQ:OZK), Webster Financial Corporation (NYSE:WBS), and Pinnacle Financial Partners (NASDAQ:PNFP), while Wintrust Financial Corporation (NASDAQ:WTFC), First Horizon Corporation (NYSE:FHN), and Comerica Incorporated (NYSE:CMA) were among the weaker performers.
The analysis emphasized the downward deposit repricing power observed across the group, with interest-bearing deposit betas averaging around 53%. This trend is expected to favorably impact net interest income (NII) in the near term, particularly for banks that have disclosed impressive spot betas. However, maintaining this momentum might be challenging if future rate cuts occur.
Average loan growth expectations were set at approximately 4.5%, with Zions Bancorporation (NASDAQ:ZION), Comerica, and First Horizon on the lower end, and Pinnacle Financial, Wintrust Financial, and Bank OZK on the higher end. UBS also adjusted its estimates for several banks, including Comerica, First Horizon, Bank OZK, Pinnacle Financial, Synovus Financial Corp. (NYSE:SNV), Webster Financial, Wintrust Financial, and Zions Bancorporation.
These revisions take into account an anticipated single rate cut by the Federal Reserve in June 2025, updated projections for the following years, and results from the current earnings season. As a result, UBS's 2025 earnings per share (EPS) estimates for these banks have increased by an average of 4%, primarily due to better net interest income and deposit repricing. However, the 2026 EPS estimates have decreased by 1% on average, due to company-specific factors.
UBS highlighted three top calls coming out of the mid-cap bank earnings season. Webster Financial was praised for its conservative approach, lower expectations, and attractive valuation, suggesting potential for a higher stock rating. According to InvestingPro analysis, Webster Financial appears undervalued based on its Fair Value calculations, with 10 analysts recently revising their earnings estimates upward. The bank has maintained dividend payments for 38 consecutive years, demonstrating consistent shareholder returns. Wintrust Financial's recent underperformance was deemed excessive by UBS, pointing to the bank's reiterated growth and margin outlook, which may not be fully reflected in its current valuation. Conversely, Comerica's recent earnings and outlook reinforced UBS's view that it lags in growth potential and capital flexibility, with the firm's 2026 EPS estimate remaining about 10% below consensus. For deeper insights into Webster Financial's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Webster Financial Corporation has been the subject of analyst attention, with both RBC Capital Markets and Raymond (NSE:RYMD) James maintaining an Outperform rating on the company. RBC Capital increased the price target for Webster Financial from $66.00 to $68.00, citing the company's strong fourth-quarter performance. The company reported an increase in net interest income, strong margins, and managed expenses, despite higher than anticipated credit costs.
Raymond James also adjusted its price target for Webster Financial, increasing it to $65.00 from the previous $61.00. The adjustment followed the company's fourth-quarter results, which showcased robust net interest income and fee growth, and a 1.1% loan growth.
Webster Financial's fourth-quarter earnings exceeded analyst expectations, with the company reporting adjusted earnings per share of $1.43. However, the company's revenue of $661 million fell short of the estimated $687.1 million. The company also reported an increase in net interest income to $608.5 million and an expansion in the net interest margin to 3.39%. These are recent developments that investors should keep an eye on.
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