People’s United second-quarter profits tumble as bank creates loan loss cushion

The People’s United Bank said its second-quarter profits fell 33% as expectations of an economic recovery from COVID-19 eased, prompting the Bridgeport-based lender to set aside more money for cover potential future loan losses.

People’s United on Thursday reported earnings of $ 86.4 million, or 21 cents per diluted share, for the three months ended June 30, compared to $ 129.7 million, or 33 cents, for the same period of 2019.

The results were comparable to consensus analyst estimates compiled by Zacks Investment Research.

The bank, which is the largest Connecticut-based in terms of total deposits, set aside an allowance for loan losses of $ 80.8 million in the quarter. This was more than double its set aside of $ 33.5 million in the previous quarter, reflecting a weaker economic outlook, with higher unemployment, sharper GDP contraction and a longer recovery schedule in the past. first semester 2021.

Results were also impacted by merger costs of $ 13.7 million and lower fees and other non-interest income, due to lower transactions with clients.

CEO Jack Barnes said People’s United performance in the second quarter reflected “the strength and resilience of the bank.”

“Clearly, the duration of the pandemic is unpredictable and its total impact on the economy is unknown,” Barnes said in a statement. “However, we remain confident that our long-standing conservative underwriting philosophy and diversified loan portfolio of high quality, cycle-tested borrowers will once again differentiate our franchise in uncertain times ahead.

Half of borrowers affected by the pandemic have benefited from a loan deferral

Like many banks, People’s United is closely monitoring industrial sectors in its loan portfolio that have been hit hardest by the effects of COVID-19.

For People’s United, which has a total loan portfolio of more than $ 45 billion, these sectors include retail commercial real estate, hotels and restaurants, which total $ 5.2 billion, or about 11% of the total. loans, but about half of that was postponed during the pandemic, People’s United revealed Thursday.

This includes $ 1.5 billion of the bank’s $ 3.6 billion in retail commercial real estate loans, $ 876 million of its $ 1.1 billion in hotel loans and $ 290 million of its $ 513 million. dollars in restoration loans.

In the retail commercial real estate portfolio, the bank said rent collection rates from tenants have “improved significantly” since May, and a second round of postponement requests from these borrowers are expected. be less than the first.

Only a few restaurant borrowers have requested a second deferral so far, the bank said, and although hotel occupancy rates have steadily improved, the bank expects most of these borrowers to request a second postponement.

Comments are closed.