UMB Financial Corporation UMBF is gaining from balance-sheet strength on the back of increasing loan and deposit balances. Also, steady capital distributions are backed by a decent liquidity position. However, intense competition, along with elevated expenses, are major headwinds.

Tailwinds for UMB Financial

Solid Balance Sheet Profile: UMBF enjoys a healthy balance sheet position. The company witnessed impressive net loan growth in the last three years (2020-2023), seeing a compounded annual growth rate (CAGR) of 13%. Also, deposits saw a CAGR of 9.8% in the same time frame. The rising trend continued for metrics in the first nine months of 2024. The acquisition of Heartland Financial will add meaningful loans and deposit balances, fortifying UMB Financial’s balance sheet. 

Fed Rate Cut to Aid NII: UMB Financial’s net interest income (NII) witnessed a CAGR of 8.2% over the last four years (ended 2023), with the uptrend continuing in the first nine months of 2024. The company’s decent loan demand will support the metric’s growth in the upcoming period. With the Federal Reserve’s latest rate cuts, the company’s NII is likely to benefit as funding costs will stabilize.

Decent Liquidity: As of Sept. 30, 2024, UMB Financial had debt (comprising short-term and long-term debt) of $1.43 billion. Cash and due from banks, and interest-bearing due from banks were $7.4 billion as of the same date. The company seems well-placed in terms of its liquidity profile. It is expected to continue meeting its debt obligations even if the economic situation worsens.

Impressive Capital Distribution: UMB Financial’s enhanced capital distribution activities look encouraging. It has been raising dividends annually regularly since 2002, with the latest hike of 2.6% announced in October 2024. Also, the bank has a share repurchase plan in place. In the first quarter of 2024, the company approved repurchasing up to one million shares of its common stock. These can take place at any point in time until its termination, following the 2025 annual meeting of the company’s shareholders. The company has not repurchased any of its common shares to date. The company's capital-distribution activities seem sustainable, given its solid liquidity, and a favorable debt-to-equity ratio and payout rate compared with the broader industry.

Superior Return on Equity (ROE):  UMB Financial’s ROE reflects its growth potential. The company’s ROE of 13.80% compares favorably with 10.42% of the industry, reflecting its efficiency in using shareholders’ funds.

Headwinds for UMBF

Escalating Expenses: Cost escalation is the key concern for UMB Financial. The non-interest expenses flared up, seeing a CAGR of 6.4% over the last four years (2019-2023), with the trend continuing in the first nine months of 2024. Though it is focusing on improving its operating leverage, a rise in expenses based on higher salaries and employee benefits costs will likely impede bottom-line growth in the upcoming period.

Intense Competition: The company faces fierce competition in its business operations. The growing market share of FinTech companies and online service providers remains a key threat to traditional banks like UMB Financial. Also, these entrants are not subject to the same level of regulations and supervision.

UMB Financial’s Price Performance & Zacks Rank

Over the past six months, shares of this Zacks Rank #3 (Hold) company have rallied 38.9%, outperforming the industry's 26% rise.

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Bank Stocks Worth a Look

A couple of better-ranked stocks from the banking space are Civista Bancshares, Inc. CIVB and LAKELAND FINANCIAL CORP. LKFN.

CIVB earnings estimates have been unchanged for 2024 over the past 30 days at $1.92. In the past six months, CIVB shares have gained 44.7%. The company flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for LKFN have been unchanged for 2024 over the past 30 days at $3.42. The company’s shares have gained 15.2% over the past six months. LKFN currently carries a Zacks Rank #2 (Buy).

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UMB Financial Corporation (UMBF) : Free Stock Analysis Report

Lakeland Financial Corporation (LKFN) : Free Stock Analysis Report

Civista Bancshares, Inc. (CIVB) : Free Stock Analysis Report

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