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Fulton Financial executives talk NIM, market disruption

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Street Talk Episode 65 - Deferral practices trap US bank portfolios in purgatory


Fulton Financial executives talk NIM, market disruption

The executive team of FultonFinancial Corp. discussed the bank's updated guidance for its net interest margin in the lower-for-longerinterest rate environment during the company's second-quarter earnings call.

Fulton Financial now expects low-single-digit quarterly net interestmargin compression absent any further rate increases. The company originally expecteda stable outlook on an annual basis, with modest volatility or +/- zero to 3 basispoints on a quarterly basis.

Executives noted that the company will need approximately $170million of average loan growth to offset a 3-basis-point decline in its NIM, whichthey believe is doable.

Sandler O'Neill & Partners analyst Frank Schiraldi did notfind the news surprising. "We generally expect this trend to continue throughthe end of the year absent rate hikes. Our full year NIM estimate of 3.18% bakesin 6 bps of compression over the next two quarters," he noted in his recentreport.

While commenting on the company's commercial pipeline, Chairmanand CEO Phil Wenger said, "[a] concentrated in-house calling effort combinedwith our increased focus on adding revenue-generating talent and market disruptionhas aided online growth of late and bodes well for future growth and market sharegains."

The company also said it saw a meaningful increase in new consumerchecking accounts at its branches located near "affected institutions,"compared to its broader branch network.

"We have and will continue to have active business developmentinitiatives and strategies to take advantage of the market disruption," saidWenger.

The company stressed that there is no change to their on its Bank Secrecy Act/anti-moneylaundering enforcement order. However, the company continued to record higher BSA/AMLcompliance-related expenses.

"While Fulton's focus on expenses and profitability is evident,BSA/AML regulatory spending adds a further challenge to near-term profitability,"FBR & Co. analyst Bob Ramsey noted in his recent research note.