Webster Financial (NYSE:WBS) Q4 2025 Earnings call January 23, 2026 09:00 AM ET Company ParticipantsJohn Ciulla - CEOLuis Massiani - President and Chief Operating OfficerNeal Holland - CFOConference Call ParticipantsBernard von-Gizycki - AnalystChristopher O'Connell - AnalystDaniel Tamayo - AnalystDavid Chiaverini - AnalystDavid Smith - AnalystJackson Singleton - AnalystJared Shaw - AnalystJon Arfstrom - AnalystManan Gosalia - AnalystMark Fitzgibbon - AnalystMatthew Breese - AnalystOperatorGood morning. Wel ...

Financial Data and Key Metrics Changes - Webster Financial generated a 17% ROTCE and a 1.2% ROA for the full year 2025, with EPS up 10% year-over-year [6] - Loans grew by 8% and deposits by 6% over the year, while tangible book value per share increased by 13% [6] - The company repurchased 10.9 million shares, enhancing capital distributions to shareholders [6] Business Line Data and Key Metrics Changes - In the fourth quarter, loans increased by $1.5 billion or 2.8%, with a full-year increase of 7.8%, primarily driven by commercial loan categories [12] - Classified commercial loans decreased by 7% and nonperforming loans were down 8%, indicating progress in credit remediation [8][15] - HSA Bank is expected to drive $1 billion-$2.5 billion in incremental deposit growth over the next five years, with $50 million-$100 million growth anticipated in 2026 [10] Market Data and Key Metrics Changes - The overall asset quality remains strong, with a decline in problem assets expected to continue [9] - The company experienced a seasonal decline in public funds of $1.2 billion but backfilled this with corporate deposits [12] - The average cost of deposits decreased to 1.91% from 1.99% in the previous quarter, reflecting competitive pricing [43] Company Strategy and Development Direction - Webster Financial's strategy in 2025 focused on execution and enhancing operational capabilities while investing in non-traditional banking verticals [6] - The company aims to maintain growth while ensuring resiliency and adaptability in a supportive macroeconomic environment [20] - Investments are being made in technology and marketing to enhance client outreach, particularly in the HSA segment [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to grow sustainably while managing risks effectively [6][20] - The outlook for 2026 anticipates loan growth of 5%-7% and deposit growth of 4%-6%, with expected revenue of $3 billion [17] - Management noted that the banking industry is experiencing positive momentum from macroeconomic and regulatory tailwinds [20] Other Important Information - The company acquired SecureSave, a provider of employer-sponsored emergency savings accounts, which is expected to enhance its offerings in the healthcare vertical [144] - The capital management strategy includes a focus on organic growth and potential share repurchases, with a CET1 target of 10.5% in the long term [96] Q&A Session Summary Question: Update on loan growth and partnership with Marathon - Management indicated that while the partnership is operational, it has not yet materially impacted loan growth, but they remain optimistic about future contributions [28] Question: Expense trends and investments in systems - Most investments are focused on marketing and client outreach to identify potential HSA account holders, with technology investments already in place [30] Question: Impact of potential changes in regulatory thresholds on expenses - Management noted that anticipated changes could provide flexibility in capital allocation, but overall strategic growth plans remain unchanged [34] Question: NIM trajectory for early 2026 - The company expects to maintain a NIM of around 335 basis points throughout 2026, with some seasonal variability [38] Question: Loan growth guidance and competition - Management explained that the 5%-7% loan growth guidance reflects a balance between growth and profitability, considering competitive pressures [61] Question: Non-interest-bearing deposits trend - There is a slowing pace in reductions of non-interest-bearing deposits, indicating a potential inflection point [113]

Financial Data and Key Metrics Changes - The company reported a return on tangible common equity of 18% and a return on assets (ROA) of nearly 1.3% with overall revenue growth of 1.6% compared to the prior quarter [5][6] - The common equity Tier one ratio increased, and the loan to deposit ratio remained flat at 81% [6][15] - The tangible book value per common share grew to $35.13, up over 3% from the previous quarter [15][23] Business Line Data and Key Metrics Changes - Total loans increased by $616 million or 1.2% linked quarter, with a notable one-time transfer of $242 million of loans to held for sale [16][17] - Total deposits grew by $739 million, with deposit costs up three basis points due to seasonal mix shifts [17][20] - Non-interest income was $95 million, reflecting a modest increase driven by growth in deposit service fees [20] Market Data and Key Metrics Changes - The company has not observed new pockets of credit deterioration across any industry or sector, maintaining a strong operating position [7][22] - The healthcare financial services segment is expected to benefit from favorable provisions in the reconciliation bill, potentially increasing HSA deposits significantly over the next five years [11][12] Company Strategy and Development Direction - The company is focused on organic growth, tuck-in acquisitions, and enhancing its healthcare services vertical [25][46] - The asset management partnership with Marathon is anticipated to enhance loan growth and drive fee revenue starting in 2026 [9][13] - The company aims to leverage its differentiated deposit profile and strong capital position to capitalize on growth opportunities [7][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth accelerating as clients adapt to the current economic environment [25][26] - The company is well-positioned to thrive in various operating environments, including an accelerating investment cycle [27][28] - Management remains vigilant regarding potential impacts from proposed tariffs but does not foresee significant exposure to affected industries [7][26] Other Important Information - The company authorized an additional $700 million in share repurchases and bought back 1.5 million shares during the quarter [6][15] - The company welcomed a new Chief Risk Officer and a new Board member, enhancing its executive management team [28][29] Q&A Session Summary Question: What is the company's willingness to reduce CET1 and thoughts on near-term buyback pace? - Management indicated a medium-term goal of 11% for CET1 and a potential reduction over time, with disciplined capital management strategies in place [34][35] Question: What is the outlook for NIM and cash balances? - Management confirmed that cash balances are at desired levels, with a slight impact on NIM expected from cash build and new debt issuance [40] Question: How does the company view deposit costs in light of expected rate cuts? - Management expects to lower deposit costs if rate cuts occur but noted significant competition in the deposit market [42][43] Question: What is the company's stance on M&A if the category four threshold is lifted? - Management stated that while they are not actively pursuing whole bank M&A, they remain open to opportunities if the regulatory environment changes [46][47] Question: How will the expansion of the HSA market impact expenses? - Management indicated no major changes in expense trajectory for HSA, with some marketing investments anticipated for consumer education [53][55] Question: What is the outlook for credit quality metrics? - Management expressed cautious optimism about continued improvement in credit quality metrics, with no new pockets of problems identified [76][78] Question: How will the joint venture with Marathon impact loan growth? - Management expects the joint venture to enhance competitive positioning and facilitate participation in larger transactions, positively impacting loan growth [95][101]