Webster Financial Corp. is reducing square footage and looking to future organic and inorganic growth opportunities after completing two deals in the first quarter, executives said during the company's quarterly earnings call.
Webster plans to reduce expenses and eliminate redundancies through branch consolidation in New York, where Webster and Sterling have some overlap, Webster CEO John Ciulla said. In addition, Webster is reducing square footage by 45% across its various markets to reflect the "future of work" and the hybrid and remote models the company plans to adopt, particularly in its call centers.
"Even before the merger, all of those call centers have started to move significantly remote, which is an industry trend," Ciulla said. "So we're also able to reduce sort of big footprint office space housing call centers over time."
The first quarter was eventful for Webster as it integrated its merger of equals with Sterling Bancorp on Jan. 31. Furthermore, the company completed its acquisition of Bend Financial Inc. and continued to generate solid performance in its underlying business. Revenue synergies for the combined companies include a larger balance sheet that will strengthen relationships with Webster's existing commercial clients and more capital market fees depending on market conditions, according to the CEO.
"We're excited to be operating as a combined organization and believe our combination is strategically compelling today as it was when we announced it a year ago," Ciulla said. "We now have $65 billion in assets, $54 billion in deposits and $44 billion in loans as a combined company."
Webster believes the economy remains strong despite the war in Ukraine, supply chain issues, a tight labor market, the ongoing impacts of the pandemic and the 1.4% first-quarter contraction in GDP. The company expects significant income improvement as rates continue to rise, and it is well on the path to meeting the financial metrics it set out when the company announced the deal, according to Ciulla.
"We are very pleased with our performance in Q1," Ciulla said. "Our reported net income was a loss of $20 million and EPS was a loss of 14 cents. These results, however, were impacted by various one-time merger-related charges, including the [non-purchase credit deteriorated] double count provision for Sterling."
Webster also joined the USDF consortium, a group of financial institutions planning to offer a new stablecoin through its innovations group.
"The consortium will work to support like-minded, forward-thinking banks as they work to integrate blockchain capabilities into their operations," Ciulla said.
Additionally, the company plans to deploy capital to expand organic growth as well as future M&A activities, similar to its recent acquisition of Bend.
"What you'll see is in our core commercial relationships, broader, deeper, more profitable relationships and, over the long term, our ability to create more cross-selling products across the bank and HSA through innovation and digital products," Ciulla said.
