Webster Financial Corporation (WBS) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate solid loan growth, strategic HSA expansion, and stable financial management. Despite minor concerns like seasonal deposit outflows and conservative loan growth guidance, the company's proactive measures, such as the SecureSave acquisition and infrastructure readiness for HSA growth, suggest a positive outlook. The sentiment is further supported by stable expenses and expected buybacks. Overall, the company's strategic positioning and financial health point towards a positive stock price movement.
Key Financial Performance
Return on Average Tangible Common Equity (ROATCE) 17% for the full year 2025, indicating strong profitability.
Return on Average Assets (ROAA) 1.2% for the full year 2025, reflecting efficient asset utilization.
Earnings Per Share (EPS) Increased by 10% year-over-year, driven by strong financial performance.
Loan Growth Loans grew by 8% year-over-year, supported by diverse asset origination capabilities and limited payoff activity.
Deposit Growth Deposits increased by 6% year-over-year, with contributions from commercial, consumer, healthcare, financial services, and interSYNC businesses.
Tangible Book Value Per Share Increased by 13% year-over-year, reflecting strong capital generation and shareholder returns.
Share Repurchases 10.9 million shares repurchased in 2025, enhancing shareholder value.
Commercial Classified Loans Declined by 5% year-over-year, reflecting credit remediation efforts.
Net Charge-Offs 35 basis points for the quarter, indicating stable credit quality.
Nonperforming Assets Decreased by 8% year-over-year, showing improvement in asset quality.
Commercial Classified Loans (Quarterly) Down 7% quarter-over-quarter, highlighting progress in credit remediation.
Assets Increased by $5 billion or 6.4% year-over-year, driven by loan and deposit growth.
Loans (Quarterly) Increased by $1.5 billion or 2.8% quarter-over-quarter, predominantly driven by commercial loan categories.
Deposits (Quarterly) Increased by 0.9% quarter-over-quarter, despite a seasonal $1.2 billion decline in public funds.
Deposit Costs Down 11 basis points quarter-over-quarter, reflecting competitive pricing and repricing efforts.
Net Interest Income (NII) Modest increase quarter-over-quarter, supported by solid loan growth and better-than-expected loan yields.
Net Interest Margin (NIM) 3.35% for the quarter, slightly better than guidance due to favorable loan yields.
Adjusted Pre-Provision Net Revenue (PPNR) Down $4.9 million quarter-over-quarter, impacted by growth-related expenses.
Adjusted Net Income Slightly higher quarter-over-quarter, benefiting from lower provision and tax rate.
Allowance for Credit Losses Decreased by $9 million quarter-over-quarter, driven by charge-offs and improved credit trends.
Tangible Book Value Per Share (Quarterly) Increased to $37.20 from $36.42 quarter-over-quarter, supported by net income and shareholder returns.
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Operating Highlights
HSA Bank enhancements: Enhanced mobile and web enrollment systems to better serve HSA participants, leading to increased account openings in the direct-to-consumer channel.
Ametros and interSYNC investments: Continued investments to fortify and advance strategic advantages in nontraditional banking verticals.
HSA Bank deposit growth: Projected $1 billion to $2.5 billion incremental deposit growth over the next 5 years, with $50 million to $100 million expected in 2026.
Ametros deposit growth: Strong outlook for deposit growth as more settlement recipients recognize the benefits of professional administration.
Loan growth: Loans grew 8% year-over-year, with diverse growth across asset classes, including commercial real estate.
Deposit growth: Deposits increased 6% year-over-year, with contributions from commercial, consumer, healthcare, financial services, and interSYNC businesses.
Credit remediation: Classified commercial loans decreased by 7%, nonperforming assets by 8%, and criticized loans by 6%.
Capital distributions: Repurchased 10.9 million shares, increasing tangible book value per share by 13% year-over-year.
Strategic positioning: Focused on sustainable growth with robust capital levels, diverse asset origination, and strong risk mitigation frameworks.
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Risk or Challenges
Macroeconomic Uncertainty: Despite strong performance, the company acknowledges an uncertain macroeconomic backdrop, which could impact asset quality and financial performance.
Loan Portfolio Risks: The company has aggressively remediated isolated pockets of its loan portfolio with less favorable credit characteristics, indicating potential risks in certain loan segments.
Deposit Pricing Competition: Deposit pricing remains competitive, and repricing efforts may accelerate, potentially impacting net interest margins.
Regulatory and Legislative Risks: The company is closely monitoring healthcare policy developments and potential legislative actions that could impact HSA Bank's operations and growth.
Seasonal Deposit Declines: A seasonal $1.2 billion decline in public funds was noted, which required backfilling with corporate deposits, indicating potential volatility in deposit levels.
Expense Growth: Increased expenses related to growth initiatives, including investments in technology and expanded opportunities at HSA Bank, could pressure profitability.
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Guidance & Outlook
Loan Growth: Anticipated loan growth of 5% to 7% for full year 2026.
Deposit Growth: Expected deposit growth of 4% to 6% for full year 2026.
Revenue: Midpoint of guidance anticipates $3 billion in revenue for 2026.
Net Interest Income: Expected to range between $2.57 billion to $2.63 billion, assuming 225 basis point Fed fund cuts in June and September 2026.
Fees: Projected to be between $390 million to $410 million for 2026.
Expenses: Anticipated to range from $1.46 billion to $1.48 billion for 2026, with first quarter expenses expected to be slightly higher due to seasonal factors.
HSA Bank Deposit Growth: Projected incremental deposit growth of $1 billion to $2.5 billion over the next 5 years, including $50 million to $100 million in 2026.
Health Care Policy Developments: Potential legislative actions could enable HSA Bank to expand its services, including provisions for HSA subsidies and other legislative changes.
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Shareholder Return Plan
Dividend Program: No specific mention of a dividend program or changes to dividend payouts was made in the transcript.
Share Repurchase Program: Webster Financial Corporation repurchased 10.9 million shares over the course of 2025, including 3.6 million shares in the fourth quarter. This was part of their capital distribution strategy to enhance shareholder value.
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Key Q&A
Q:How is the partnership with Marathon influencing loan growth?
A:The partnership with Marathon is live and operational, but it has not yet had a material impact on loan growth trajectory in the sponsor business. The company expects a couple of million dollars in positive income from the JV, which is included in the loan growth forecast. The management remains optimistic but conservative about its impact on financial performance in 2026.
Q:What are the expense trends and investments in systems for the bronze opportunity?
A:Most of the investment is in marketing and client outreach rather than system changes. The technology investment is largely complete, and the focus is on identifying, motivating, and educating individuals to become HSA holders. Larger investment dollars will continue into 2026.
Q:How would lifting the Category 4 threshold impact the company strategically?
A:Lifting the Category 4 threshold would allow the company to reduce annual costs by $20-$30 million and provide flexibility to increase profitability or redirect investments into revenue-generating opportunities. However, it would not significantly change the company's growth trajectory or strategic plans.
Q:What is the NIM trajectory for early 2026?
A:The NIM is expected to maintain at 3.35% for the full year of 2026, with seasonal variations. It may pick up a few basis points in Q1, decrease slightly in Q2, and tick back up in Q3.
Q:How much room is there to lower deposit costs, and what was the period-end cost of deposits?
A:The company was more aggressive in lowering deposit costs in Q4, ending with an average cost of deposits at 1.91% versus 1.99% for the quarter. The overall beta assumption for the cycle through the end of next year is 30%.
Q:What are the current spreads on commercial real estate and C&I, and will there be growth in lower-risk sectors in 2026?
A:Credit spreads have tightened by 30-50 basis points over the last 18 months. Stabilized commercial real estate assets have spreads of 180-200 basis points over reference rates. The company expects growth in lower-risk sectors like public sector finance, which could reduce the reserve as a percentage of loans.
Q:Why is the loan growth guide set at 5%-7% despite strong growth in 2026?
A:The guide is conservative due to lower payoffs in Q4 and a focus on maintaining profitability and deliberate capital allocation. The company aims for optimal growth and profitability mix, with potential upside if the economy performs well and M&A activity increases.
Q:Is there a ceiling for the loan-to-deposit ratio, and what is the mix of deposit growth in 2026?
A:The company does not have a formal ceiling but aims to stay in the 80%-85% range for the loan-to-deposit ratio. Deposit growth is expected to be similar to 2025, with strong growth in the HSA and Ametros businesses.
Q:What is driving the movement in borrowings and the fee guide variability?
A:The movement in borrowings is due to seasonality and sub-debt transactions. Fee guide variability is driven by unusual categories like BOLI, CVA, and direct investments, which have lumpiness in flows.
Q:How did the open enrollment season for HSA go, and what is the outlook for direct-to-consumer growth?
A:The open enrollment season was slightly ahead of last year, with approximately 250,000 accounts opened. Direct-to-consumer growth is expected to accelerate over the course of the year.
Q:What is the pace of buybacks and the timing for reducing CET1 to the long-term target?
A:The company expects a similar pace of buybacks as in 2025. The timing for reducing CET1 to the long-term target of 10.5% will likely be after the annual stress testing and capital management activities in Q2.
Q:What are the latest thoughts on the office book and health care services portfolio?
A:The office portfolio is down to $720 million, and the health care services portfolio is down to $400 million. Both are adequately reserved, and no significant deterioration is expected. The company aims to maintain a 25-35 basis point annualized charge-off rate.
Q:Is there a bottom for the noninterest-bearing deposit mix?
A:The pace of reductions in noninterest-bearing deposits is slowing, and the company is close to an inflection point. There is a focus on growing core commercial and consumer relationships in noninterest-bearing accounts.
Q:What areas are seeing more or less deposit competition geographically?
A:Deposit competition is strong across multiple categories, including consumer CDs, direct bank deposits, and commercial deposits, particularly in the company's geographic footprint.
Q:What is driving better-than-expected loan yields and the impact of leverage lending guidance withdrawal?
A:Loan yields were slightly better than expected due to mix changes and positive movements in Q4. The withdrawal of leverage lending guidance provides flexibility to do more transactions but does not significantly change financial outlooks.
Q:What is the rationale behind the SecureSave acquisition, and what is the appetite for further deals?
A:SecureSave adds employer-sponsored emergency savings accounts to the company's offerings. The company is actively looking for bolt-on acquisitions to enhance deposit gathering and fee income streams but remains disciplined on pricing.
Q:What is the slope of expenses for 2026?
A:Expenses will increase slightly in Q1 due to seasonal factors and remain stable or slightly increase in subsequent quarters.
Q:What is the seasonality of loan and deposit growth in 2026?
A:Loan and deposit growth is expected to be relatively even throughout the year, with potential seasonality in Q1 and the back half of the year.
Q:Is the infrastructure in place to support HSA growth from the bronze opportunity?
A:Yes, the necessary infrastructure and technology are in place to support HSA growth without additional buildout.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer on the specific geographic areas with less deposit competition, stating only that competition remains strong across multiple categories. Additionally, they did not provide detailed numbers on the SecureSave acquisition or specific timing for reducing CET1 to the long-term target.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Director Investor
HSA Bank
HSA account
adjustment
backdrop
balance sheet
book value
business
capital
charge offs
client activity
deposit HSA
development
fund
funding
harbor
health care
interest income
investment
loan deposit
loss
offs basis
origination capability
outlook
plan participant
portion
potential
presentation
provision
repricing
slide
trend Slide
WBS Transcript
Webster Financial Corporation (WBS) Q4 2025 Earnings Call Transcript
Positive1-23
The earnings call summary and Q&A indicate solid loan growth, strategic HSA expansion, and stable financial management. Despite minor concerns like seasonal deposit outflows and conservative loan growth guidance, the company's proactive measures, such as the SecureSave acquisition and infrastructure readiness for HSA growth, suggest a positive outlook. The sentiment is further supported by stable expenses and expected buybacks. Overall, the company's strategic positioning and financial health point towards a positive stock price movement.
Casey's General Stores, Inc. (CASY) Q2 2026 Earnings Call Transcript
Unknown12-10
The earnings call reveals a balanced outlook with both positive and negative elements. Loan and HSA growth are promising, but deposit growth is limited. Flat NII and the lack of forward guidance on margins may concern investors. The Q&A indicates stable operations but highlights challenges like OpEx increases and competitive pressures. Overall, the absence of strong catalysts or major concerns suggests a neutral stock price movement.
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Webster Financial Corporation (WBS) Q3 2025 Earnings Call Transcript
Positive10-17
The earnings call summary highlights strong financial performance with growth in HSA deposits, a promising joint venture with Marathon Asset Management, and a positive outlook for loan growth and net interest income. The Q&A section reveals stable credit quality and no major concerns. While some responses were vague, the overall sentiment is positive, supported by strategic growth initiatives and stable financial health, suggesting a likely positive stock price movement over the next two weeks.
WBS Slides
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