Webster Financial Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Leishner - Keefe, Bruyette & Woods - Analyst : This is Andrew Leishner on for Chris McGratty. Just starting on capital, just given the current environment and outlook for potential deregulation, what is your willingness to reduce CET1 and then just overall thoughts on your term pace of the buyback. Thanks.

Question: Casey Haire - Autonomous - Analyst : Question on the NIM outlook, the cash build, are you guys good with where the cash balances are today? And then also the I think you guys talked about a long-term debt issue coming in the second half of the year, just wondering what -- how that's going to impact.

Question: Mark Fitzgibbon - Piper Sandler - Analyst : Just to follow up, I was curious on deposit costs for the second half of the year given your expectation for two rate cuts and also interSYNC strong deposit growth. How are you thinking about deposit cost?

Question: Mark Fitzgibbon - Piper Sandler - Analyst : Okay. And then just to follow up, John, unrelated, if the category IV threshold gets lifted, how important does bank M&A become for Webster? And if so, what would you be looking for in potential targets whether business line or geography or any other -- any comments on that would be much appreciated. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 1:00PM, WBS.N - Q2 2025 Webster Financial Corp Earnings Call

Question: Matt Breese - Stephens Inc - Analyst : Two things on originations. First, C&I originations picked up quite a bit this quarter over $2 billion. How much of that feels sustainable and how our spreads holding up there? And then two, commercial real estate originations were strong as well at $1.2 billion. Balances were actually down, so maybe you could talk about that dynamic and how payoffs are playing a role in commercial real estate today.

Question: Matt Breese - Stephens Inc - Analyst : Great. And my second question is just in light of Mamdani's ascendancy here towards the mayorship in New York City, and of course this is if he wins, how much of a valuation impact do you think there could be to the heavier rent regulated buildings? Could this asset class become more of a problem for you and do you have at your fingertips or allowance against this asset class you already have?

Question: Anthony Elian - JPMorgan Chase & Co - Analyst : The credit quality metrics inflected as you would expect by this part of the year, but should we expect the metrics you highlight on slide 13 to improve further in the coming quarters? I understand there will be one-offs, but is this declaring victory on credit quality now or should we expect these metrics to improve even further?

Question: David Smith - Truist Securities, Inc. - Analyst : Just on the topic of credit continuing to improve, is there any further benefit to recovery of interest income in the NII forecast as other non-accruals to work down over time?

Question: Bernard Von-Gizycki - Deutsche Bank AG - Analyst : Neil, first question just on non-interest bearing deposits, there's a nice uptake of about $200 million in a quarter, and I know that previous guidance was expecting the DDAs remain flat on a full year basis. Just any thoughts on how you're thinking about any potential growth in the second half and how we should think about full year?

Question: Bernard Von-Gizycki - Deutsche Bank AG - Analyst : Okay, great. And just one follow up for Luis. Just on HSA, like you mentioned on the three provisions included in the final bill, most of the benefits that you mentioned is coming from the bronze HSA plan participants, but the other two regarding the direct primary care and telehealth, anything, how big were those would you say of the $1 billion to $2.5 billion you cited? Was it just like a rounding error or just anything you can get -- just on like sizing since the bonds is like the bigger component.

Question: Daniel Tamayo - Raymond James & Associates, Inc. - Analyst : Most of my questions asked and answered at this point, but I guess first just you've talked about the C&I and the CRE broadly, but curious on the sponsor side that's been a little bit light lately. If you're seeing any changes in demand there, if you're baking in any pickup in that book in the back half of the year as the other categories start to pick up.

Question: Daniel Tamayo - Raymond James & Associates, Inc. - Analyst : Great, thanks, Luis for that. And then I guess just quickly on the deposit side. So you had the seasonal factors that impacted your growth or inflows of the brokered CDs in the quarter. Curious if you can -- how you're thinking about the movement of that of that portfolio. Maybe in the third quarter, but overall, just thoughts on where you think that category shakes out for you as you look at the contribution of brokered as percentage of deposits longer term.

Question: Timur Braziler - Wells Fargo Securities LLC - Analyst : Following up on the Marathon commentary, I'm just wondering to what extent does that loan growth come just from looking at larger deals, and is that a two-way street where things that Marathon might originate will end up on your balance sheet or is that just what you're originating will end up on the JV? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 1:00PM, WBS.N - Q2 2025 Webster Financial Corp Earnings Call

Question: Timur Braziler - Wells Fargo Securities LLC - Analyst : Okay, great. And then as a follow-up. Just looking at margin trajectory, realizing that it benefited a little bit from some interest recoveries here in 2Q, but can you just maybe talk to some of the competitive landscapes around the deposit side, some of the spread tightening on new loan production and is the expectation that we're still tracking towards a [3.40%] margin as we go through the back end of the year or does maybe some of the loan growth commentary mitigate some of those pressures?

Question: Ben Gerlinger - Citi - Analyst : Just following up a little bit or [tangential] on the Timur's question about the Marathon. With the larger loan size (technical difficulty) you would theoretically think is maybe a little bit bigger company and then with the fee income opportunities (technical difficulty) you guys teased it a little bit that it's going to take a little while to ramp up and it's more of a '26 question than '25, but once we get that flywheel really going, the contribution to fee income, are we talking like a couple million incremental per quarter or are we talking like tens of million per quarter once you get the full thing going, so probably more like a runway late '26.

Question: Ben Gerlinger - Citi - Analyst : Got you. That's helpful. I just want to dig a little deeper (technical difficulty) you have the -- let's call it back office or banking opportunities for legacy Marathon relationships now or is it really trying to keep separate church and state between Webster, JV and Marathon on like opportunities (technical difficulty)--? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 1:00PM, WBS.N - Q2 2025 Webster Financial Corp Earnings Call

Question: Laurie Hunsicker - Seaport Research Partners - Analyst : Two questions. Number one, what was your share buyback price on the 1.5 million shares in the quarter? And then number 2, just going back to the rent regulated multi-family that $1.4 billion, do you have an approximate debt service coverage? And then anything to think about or know about on that $185 million of maturities coming up over the next 12 months?

Question: Laurie Hunsicker - Seaport Research Partners - Analyst : Perfect, thank you so much. Oh, and anything on that, $185 million of maturities that we should be thinking about?