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Loan Growth Supports Hancock Whitney (HWC) Amid Cost Woes

Zacks Equity Research
·4 min read

Hancock Whitney Corporation’s HWC strategic expansion initiatives, and solid loans and deposit balances position it well for the future. Its efficient capital deployment activities indicate a solid liquidity position, through which it will keep enhancing shareholder value.

Analysts also seem optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for HWC’s current-year earnings has been revised 3.5% higher over the past 30 days.

However, despite the expected rate hikes, relatively lower interest rates might hamper margin growth to some extent. Elevated expenses will likely hurt profits. Thus, the company currently carries a Zacks Rank #3 (Hold).

So far this year, shares of Hancock Whitney have lost 3.6% compared with the 12.7% decline recorded by the industry.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Looking at its fundamentals, while revenues (on a tax-equivalent basis) declined in first-quarter 2022, it witnessed a compound annual growth rate (CAGR) of 6.9% over the last six years (2016-2021). Total loans saw a CAGR of 4.8% over the same time frame. Robust economic growth and a gradual rise in loan demand will likely continue to support the top line.

For 2022, management expects total core loans (excluding Paycheck Protection Program loans) to rise 6-8% year over year, with quarterly performance affected by seasonality. Total deposits are expected to be flat or slightly down from the 2021 reported level.

Apart from organic expansion efforts, HWC has undertaken acquisitions in the past, which continue to support its financials. Given the strong balance sheet position, the company is well-poised to further grow through inorganic means to diversify revenues and improve market share.

The company’s strategic investments in growth and new markets are expected to further bolster its top line and help achieve an efficiency ratio of 55% by the end of fourth-quarter 2022.

As of Mar 31, 2022, Hancock Whitney had total debt of $1.86 billion (87.1% of which consisted of short-term borrowings). The company maintains investment grade ratings of BBB/Baa3 and a stable outlook from Standard and Poor, and Moody’s Investors Service, respectively. Thus, despite having a huge debt balance, the company will likely be able to meet its debt obligations in the near term, even if the economic situation worsens.

However, while HWC’s expenses declined in first-quarter 2022, the same witnessed a five-year (2017-2021) CAGR of 3.9%. Although the acquisition of MidSouth Bancorp has resulted in significant cost savings, the company’s continued efforts to expand inorganically and upgrade technology are expected to keep costs elevated in the near term.

Pressure on margins is another major concern. While net interest margin (NIM) (tax-equivalent) improved to 3.44% in 2019, the same declined to 3.38% in 2018 from 3.43% in 2017. The downward trend continued in 2020, 2021 and the first quarter of 2022, as NIM declined to 3.27%, 2.95% and 2.81%, respectively. Despite the March and May rate hikes, along with expectations of further rate increases in 2022, relatively lower rates might keep NIM under pressure for some time in the near term.

Hancock Whitney has significant exposure to residential mortgage, construction and land development, as well as commercial real estate loans. Despite some improvement in the housing sector, the company’s exposure to these risky loans remains concerning. If there is any deterioration in real estate prices, the company’s financials will be hurt.

Stocks to Consider

A couple of better-ranked stocks from the finance space are Gladstone Capital Corporation GLAD and Main Street Capital Corporation MAIN. Both GLAD and MAIN currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The consensus estimate for Gladstone Capital’s current fiscal year’s earnings has been revised 8.1% upward over the past 60 days. Over the past year, GLAD’s share price has rallied 9.6%.

Main Street Capital’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. MAIN’s shares have lost 3.9% over the past year.


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Main Street Capital Corporation (MAIN) : Free Stock Analysis Report

Gladstone Capital Corporation (GLAD) : Free Stock Analysis Report

Hancock Whitney Corporation (HWC) : Free Stock Analysis Report

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Zacks Investment Research