Regional banking company Webster Financial (NYSE: WBS) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 13.1% year on year to $732.6 million. Its non-GAAP profit of $1.54 per share was 1.1% above analysts’ consensus estimates.

Is now the time to buy WBS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Webster Financial’s third quarter results reflected solid execution across its core banking businesses, with management highlighting broad-based loan and deposit growth as key contributors. While revenue and non-GAAP earnings per share both slightly exceeded Wall Street expectations, CEO John Ciulla pointed to “diverse balance sheet growth while maintaining substantial liquidity and conservative credit positioning” as the drivers behind the quarter’s performance. The company noted that all major loan portfolios posted gains, and deposit growth was supported by strength in both commercial and healthcare segments. Management also cited ongoing discipline in credit quality, with criticized loans declining and charge-offs staying near the low end of their normalized range.

Looking ahead, management is focused on leveraging recent legislative changes to expand its HSA Bank business and continuing to invest in digital enrollment capabilities to serve a larger addressable market. President Luis Massiani described the upcoming expansion of HSA eligibility as a “great opportunity for us,” noting that investments in technology and product bundling are designed to better capture direct-to-consumer relationships. CFO Neal Holland cautioned that net interest income is expected to remain flat next quarter, with seasonal deposit outflows and margin pressure from high-quality, lower-yield loan originations likely to offset balance sheet growth. Management remains attentive to the broader rate environment and regulatory changes that could free up resources for business initiatives.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to broad-based loan and deposit growth, strong asset quality, and early progress in new business lines like the Marathon credit partnership.

• Loan growth across portfolios: All major lending categories contributed to loan growth, including commercial, consumer, and commercial real estate, with pipelines described as “robust” by CEO John Ciulla. This diversified approach helped insulate the bank from volatility in individual segments.
• Deposit momentum in key segments: Deposit growth was supported by strong performance in commercial and healthcare financial services, as well as seasonal increases in public funds. CFO Neal Holland emphasized the preference for growing core deposits over brokered deposits due to cost advantages and stability.
• Credit quality stability: Asset quality metrics remained favorable, with criticized loans declining over 7% and charge-offs staying at the lower end of the company’s typical range. Ciulla noted that most credit risk remains concentrated in discrete areas such as healthcare and office portfolios, with no emerging correlated risks.
• Marathon joint venture gains traction: The private credit partnership with Marathon Asset Management is now fully operational, expanding Webster’s product set for sponsor clients. Early results have been positive, with new lending opportunities and potential for future on-balance sheet business.
• HSA Bank expansion opportunity: Recent legislative and regulatory changes are increasing the addressable market for health savings accounts (HSAs), with management investing in digital enrollment and product bundling to better capture direct consumer relationships. Massiani highlighted the shift as a “great opportunity” for both deposit and fee growth over the next several years.

Drivers of Future Performance

Webster Financial’s outlook is shaped by continued growth in core lending and deposit franchises, while managing margin pressure and capital allocation in light of regulatory changes.

• Expanded HSA eligibility: The upcoming expansion of HSA eligibility to bronze and catastrophic Affordable Care Act plans is expected to significantly increase Webster’s addressable market. Management is investing in digital capabilities and new product bundles to capture direct-to-consumer growth, which could drive both deposit and fee income in 2026 and beyond.
• Margin and interest rate pressures: Net interest margin is expected to face continued pressure from onboarding higher-quality, lower-yield loans and the impact of recent rate cuts on variable-rate portfolios. Holland signaled that next quarter’s net interest income should be “effectively flat,” with deposit outflows and higher debt costs offsetting balance sheet growth.
• Capital redeployment flexibility: Potential regulatory shifts may free up investment dollars, allowing Webster to accelerate digitization, launch new teams in growth markets, and pursue targeted acquisitions in healthcare-related segments. Ciulla noted that capital prioritization between loan growth, business investment, and share buybacks will depend on the pace of organic opportunities.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be monitoring (1) execution on digital enrollment and new product bundles to capitalize on the expanded HSA market, (2) stability in net interest margin and the impact of further rate cuts on loan yields and deposit costs, and (3) results from the Marathon joint venture as it matures and brings more lending opportunities on balance sheet. Progress on targeted investments and regulatory clarity will also be important drivers of Webster’s ability to sustain profitable growth.

Webster Financial currently trades at $54.58, in line with $54.07 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

Our Favorite Stocks Right Now

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.