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Here's Why You Should Hold UMB Financial (UMBF) Stock Now

UMB Financial Corporation UMBF has a well-diversified operation aligned strategically to generate steady, consistent revenues. Most of its revenues come from its commercial banking division, followed by institutional banking and personal banking. Yet, the rising trend of operating expenses will remain a concern.

Its recent agreement to acquire the health savings account (HSA) business of Old National Bank will significantly expand UMBF’s direct-to-employer accounts and consequently enhance its revenue capabilities.

The company’s net loan and deposit growth is quite impressive. Over the past five years, net loans and deposits witnessed a compounded annual growth rate of 11% and 28%, respectively. With the recovery in the economy and resumption of business activities, the demand for loans is expected to improve in the upcoming period. Management expects a strong loan pipeline in the second quarter, positioning it for another quarter of solid growth.

UMB Financial’s capital deployment activities are encouraging. It has been raising dividends on a regular basis since 2002. In April 2022, it approved a share repurchase plan program of up to 2 million shares, valid until April 2023.

Last year, UMBF managed to lower its non-interest expenses. However, expenses are likely to be high due to the company’s investment in new technologies. Such increasing current costs might limit the bottom-line expansion.

Apart from technological expenditure, we believe that its declining capital position will inhibit any future proactive expansion. In fact, as of Mar 31, 2022, the total risk-based capital ratio was 13.55%, which declined from the prior-year quarter’s 14.28%.

With respect to liquidity, the company has been witnessing high debt load over the past few quarters, with the trend continuing in the first quarter. Cash and due from bank also witnessed a fall over the same time period. Though its operations are well-diversified, most of UMB Financial’s loan portfolio is concentrated in commercial and industrial loans, for which it may face tough competition.

Currently, UMBF carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have declined 18.4% compared with the 14.6% fall recorded by the industry.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Stock That Warrant a Look

A couple of better-ranked stocks in the banking space are Old Second Bancorp OSBC and Commerce Bancshares CBSH. OSBC sports a Zacks Rank of 1 (Strong Buy) while CBSH currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Old Second Bancorp’s Zacks Consensus Estimate for the current-year earnings has been revised upward by 20% over the past 60 days. Commerce Bancshares’s Zacks Consensus Estimate for the current-year earnings has been revised marginally upward.

Over the past month, shares of OSBC and CBSH have declined 7.2% and 4.9%, respectively.


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