Marshall & Ilsley Reports High Loss - Analyst Blog
02 Maio 2011 - 9:00AM
Zacks
Marshall & Ilsley Corporation’s (MI) first
quarter 2011 loss of 27 cents per share exceeded the Zacks
Consensus Estimated loss of 18 cents but was in line with the
prior-year quarter result.
M&I’s results for the reported quarter suffered mainly due
to lower net interest income and non-interest income. However,
decrease in non-interest expenses and provision for loan and lease
losses were the positives. Also, the company’s credit quality
showed mixed results during the quarter.
M&I’s first quarter net loss came in at $142.0 million as
against $140.5 million reported in the comparable period last
year.
Quarter in Detail
M&I’s total revenue for the reported quarter stood at $538.6
million, down 14.6% from $630.8 million in the year-ago quarter.
Total revenue also missed the Zacks Consensus Estimate of $565.0
million.
Tax equivalent net interest income (NII) for the reported
quarter plunged 13.9% year over year to $352.1 million. Net
interest margin (NIM) declined 5 basis points (bps) year over year
to 3.08%.
The fall in both NII and NIM was primarily attributable to
higher-than-expected cash balance, reduction in earning assets, and
lower yielding investment securities portfolio. But, these
negatives were partly mitigated by lower funding costs.
Non-interest revenues for the reported quarter were $186.5
million, down 15.9% from $221.7 million in the prior-year quarter.
The drop was primarily a result of significant decline in Other
revenue, which was partially offset by higher Mortgage Banking
revenues, Service Charges on Deposits, and Wealth Management
revenues.
Non-interest expenses fell 10.9% year over year to $326.0
million. Credit-related expenses were $27.4 million, down from
$40.6 million in the year-ago quarter.
Efficiency ratio deteriorated from 58.0% in the prior-year
quarter and stood at 61.4% in the quarter under review.
Asset Position
At March 31, 2011, Assets under Management were $34.1 billion
versus 32.7 billion in the year-ago quarter. Assets under
Administration were $136.2 billion at March 31, 2011 compared with
$124.6 billion at March 31, 2010.
Credit Quality
Credit quality was a mixed bag during the quarter. While
non-performing assets declined 19 bps year over year to 5.40% of
period-end loans & leases and other real estate owned, net
charge-offs increased 88 bps year over year to 4.82% of average
loans and leases.
At the end of the quarter, the allowance for loan and lease
losses increased 36 bps year over year to 3.91% of total loans and
leases. However, provision for loan and lease losses stood at
$418.8 million, down 8.6% from $458.1 million in the year-ago
quarter.
Capital Ratios
As of March 31, 2011, M&I’s tangible common equity ratio was
7.9% compared with 8.1% as of March 31, 2010. Book value per share
declined significantly to $8.65 from $9.95 as of March 31,
2010.
Peer Performances
In M&I’s peer, Northern Trust Corporation’s
(NTRS) first quarter earnings missed the Zacks Consensus Estimate
owing to a persistently low interest rate environment that
negatively affected NIM.
However another competitor, Huntington Bancshares
Inc.’s (HBAN) first quarter 2011 earnings outpaced the
Zacks Consensus Estimate. The company’s better-than-expected
results reflected a significant improvement in credit quality, a
modest growth in loans and deposits, an increase in NIM, and low
levels of non-interest expenses. However, the company’s top line
declined during the quarter.
Our Viewpoint
Though the turnaround in credit quality in the recent quarters
has been impressive, a lack of core deposit growth and the ongoing
interest rate volatility are expected to keep M&I’s NIM under
pressure.
Management has been able to meet most of the challenges with the
help of outflow cost funding, disciplined deposit pricing and the
preservation of its strong capital base, but pressure on core
revenues and higher credit costs will weigh on upcoming results.
However, the company’s impending merger with Bank of
Montreal (BMO) would provide some relief to the company
and also lessen much of its woes.
M&I currently retains a Zacks #3 Rank, which translates into
a short-term ‘Hold’ rating. Also, considering the fundamentals, we
maintain a long-term “Neutral” recommendation on the shares.
BANK MONTREAL (BMO): Free Stock Analysis Report
HUNTINGTON BANC (HBAN): Free Stock Analysis Report
MARSHALL&ILSLEY (MI): Free Stock Analysis Report
NORTHERN TRUST (NTRS): Free Stock Analysis Report
Zacks Investment Research
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