7. Webster Financial Corporation (NYSE:WBS)
Number of Hedge Fund Holders In Q2 2024: 42
Webster Financial Corporation (NYSE:WBS) is a Connecticut based regional bank that provides consumer, commercial, and other banking services. Like KeyCorp, it also has a diversified loan portfolio which has a total value of $51.5 billion. Within this, $14.1 billion is from commercial real estate, $9.8 billion comes through consumer loans and another $16.7 billion is from non mortgage commercial loans. Additionally, Webster Financial Corporation (NYSE:WBS) has also efficiently managed its deposit base by not relying on a single category for a large chunk of liabilities. Out of the bank’s $62 billion in deposits, $9.9 billion are non interest bearing demand deposits, which help reduce its interest costs. Another $1 billion are time deposits that are due for maturity in 2025 and beyond, and Webster Financial Corporation (NYSE:WBS) also benefits from $8.5 billion in health savings deposits, which are among the few of their kind in the banking industry. The HSA accounts are specialized entities that enable businesses and consumers to take tax advantages to manage their and their employees’ healthcare needs, and given the growing elderly population in America, they could offer Webster Financial Corporation (NYSE:WBS) a key competitive edge.
Webster Financial Corporation (NYSE:WBS)’s management also shared key details for its exposure to the troubled commercial real estate sector during the Q2 2024 earnings call:
“There were no significant changes to the performance characteristics of our rent regulated multifamily portfolio, where our conservatively underwritten portfolio’s performance has held up really well, as you can see by consistently low levels of classified and non-accrual loans. The portfolio is granular, has conservative LTVs and debt service coverage ratios was underwritten to property cash flows at the time of origination and has limited maturities in the next two years. For office, we also have a portfolio that is granular with conservative underwriting characteristics. As the sector continues to be challenged, we did have several loans moved to non-accrual, which was the primary driver of the increase in our overall NPLs this quarter.
Office balances were $950 million at the end of the second quarter, down from just over $1 billion last quarter. In our office portfolio, approximately 75% of the remaining loan balances have some form of credit enhancement which adds significant value in mitigating potential losses. A few important comments to make as it relates to overall credit. Even with the negative risk rating migration, our NPL ratio, classified loan ratio and annualized charge-off rate in the quarter all remain proximate to or better than pre-pandemic Webster levels, meaning these metrics remain consistent with a more normalized credit environment. As we continue to aggressively and proactively manage and review the portfolio, after the material change in the environment or unforeseen surprises, we don’t see this rate of upgrade migration continuing in Q3.”