Despite COVID-19, People’s United’s 1Q profits rise, earnings-per-share flat

HBJ Photo | Matt Pilon People’s United Bank CEO Jack Barnes. People's third-quarter 2020 profits beat last year's.

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By Matt Pilon

Bucking regional peers and national giants that have reported significant drops in first-quarter profits due to the COVID-19 pandemic, Bridgeport-based People’s United Financial on Thursday said its quarterly net income grew 14%.

People’s United said its January to March profits totaled $126.9 million, or 30 cents per diluted share, up from $111.1 million, also 30 cents per share, in the same quarter a year prior.

Despite the higher profits, People’s United’s earnings per share was flat because the bank had a greater number of outstanding shares in the recent quarter than it did a year ago.

People’s United, which has built up its existing Greater Hartford presence over the past two years through the acquisitions of Farmington Bank and United Bank, said it had to increase its provision for credit losses as a result of the ongoing pandemic, from $5.6 million to $33.5 million, but it overcame that hit to its income through a combination of higher loan interest income as well as other non-interest income, such as earnings from interest-rate swaps.

People’s United CEO Jack Barnes credited his company’s “conservative underwriting philosophy, superior service, diversified business mix and prudent liquidity and capital management.”

Though People’s United said it entered the pandemic in a position of strength, the ensuing economic downturn promises to have a “meaningful effect” on its results this year.

Just how big the impact will be is unclear. People’s on Thursday withdrew its full-year guidance that it issued back in January.

However, David Rosato, the bank’s senior executive vice president and chief financial officer, told analysts on a call Thursday evening that despite the impacts, People’s United still anticipates it will be profitable “through every quarter of this year.”

Rosato said the bank’s baseline economic forecast, performed in late March, indicates a U-shaped recovery in the second half of 2020, though he said People’s United also analyzed other scenarios with longer recovery times.

COVID-19 has created an uncertain future for hotels, restaurants and various other industries, and People’s said its “conservative approach to underwriting is evident” when assessing its exposure to those sectors.

The company’s overall $44.3 billion loan portfolio contains $4.7 billion in retail loans, $1 billion in hospitality loans and $540 million in restaurant loans. In addition, The bank’s exposure to airlines, cruise lines, casinos, auto lending and consumer credit cards is either immaterial or nonexistent.

People’s United said more than half of its retail exposure includes a combination of grocery-anchored properties, pharmacies, big-box home improvement stores and gas stations and convenience stores. Nearly half of its restaurant loans are to quick-service outlets, which have experienced less disruption than dine-in restaurants.

The bank said it had taken in approximately 11,000 applications for small business borrowers seeking Paycheck Protection Program (PPP) loan assistance from the federal government, and as of April 21 had submitted and received approval for 9,600 of them, totaling $2.1 billion in assistance.