Five months into merger, Webster Financial profits rebound

HBJ PHOTO | ANDREW LARSON Webster Bank's office at 145 Bank St., Waterbury.

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With a rebound in profits reversing a first quarter drop in per-share income, Stamford-based Webster Financial is touting success solidifying its merger with New York’s Sterling Bancorp.

Earnings information released Thursday shows net income in the second quarter rose to $178.1 million, or $1 per share. That is an improvement from the first-quarter results, which saw a $16.7 million loss — 14 cents per share — due to costs in the immediate wake of the merger.

Profitability rose even as the company bore $66.5 million in pretax, merger-related expenses, according to Webster.

“Five months after closing our merger we’ve made material progress,” John R. Ciulla, Webster’s president and CEO, said during a morning earnings call for investors. “While we have a ton of work in front of us bringing systems, products and processes together, we are operating as one organization and the strategic merits of bringing the two companies together is reflected in our accomplishments so far this year.”

Ciulla said the merger provides the ability to grow in “unique asset classes,” with the commercial loan portfolio increasing 12% on an annualized basis.”
Ciulla also touted the merged bank’s improved ability to weather a possible economic downturn.

“Things feel good on the ground today, despite tangible macro headwinds and an increased risk of recession,” Ciulla said. Still, the bank has a “consistent and prudent risk management framework” which will serve it well in any environment, he said.

Among other items, Webster’s release Thursday highlighted second-quarter revenue of $607.6 million, a quarter-end loan and lease balance of $45.6 billion (80% of which is commercial) and a quarter-end deposit balance of $53.1 billion.

Glenn MacInnes, Webster’s executive vice president and chief financial officer, said the bank anticipates any potential recession would be mild, but is ready for any number of outcomes.

“I don’t want you to get the sense we are not in full preparedness mode,” MacInnes said Thursday morning. “…We are not pedal-down, meaning loan growth at all costs.”

MacInnes said Webster is avoiding loans to hotels and “really not doing anything in office.” Webster is focused on financing “healthy” sectors including distribution and multifamily housing, he said. The bank is “really careful” of cyclical contractors, those impacted by energy costs and the tight labor market, he said.

MacInnes predicted loan growth will remain “decent” but contract during whatever shift there is in the economic cycle “because our borrowers will be more cautious and so will we.”