Even as it announced a bigger than expected quarterly loss, Webster Financial Corp. made a bullish statement Tuesday about its prospects: It wants to repay the $400 million it received last year from the U.S. Treasury's Capital Purchase Program.
"We intend to ask the Treasury for guidance on an orderly responsible payment plan for our $400 million," James C. Smith, Webster's chairman and chief executive, told analysts on a conference call. "The key word in that sentence is responsible."
The bank said it intends to contact the Treasury in the next several weeks. It couldn't predict when it might hear back.
Some smaller banks have already won approval to repay the funds, but the U.S. Treasury is holding off on requests by larger banks such as Goldman Sachs and JP Morgan Chase until the completion of "stress tests" to determine their health and whether repayment would threaten the economic recovery."Webster, along with most banks, realizes there are a lot of strings attached since they got the money," said Mark Fitzgibbon, an analyst at Sandler O'Neill in New York.Smith said Webster has used the government funds as agreed, investing half in mortgage-backed securities and the rest in making new loans.On Tuesday, the Waterbury-based parent of Webster Bank reported a net loss of $21.6 million, or 41 cents a share, in the quarter that ended March 31, as the bank quadrupled the money it set aside to cover loans that might go bad.
The net loss compared with net income of $24.3 million, or 47 cents a share, a year earlier.
The per-share loss for the most recent quarter was 13 cents more than the 28-cent-a-share net loss expected by analysts, according to Thomson Reuters.
Before paying dividends on preferred shares, the net loss was $11.3 million.
"Our first quarter results reflect our cautious approach in the face of a weakening economy," Smith said. "As in the previous quarter, we made sizable provisions for loan losses."
The $66 million set aside in the quarter was four times the $15.8 million set aside in the same quarter a year ago, but less than the $100 million in the previous quarter, a record for the banking company.
Smith said the actual number of loans written off in the quarter — $30.1 million — was less than half the $66 million set aside in the quarter — a sign of its cautious approach and concern about further economic trouble in the months ahead.
Webster shares fell as much as $1.19 Tuesday but recovered to close at $5.48, down 19 cents.
Smith said the bank remains well-positioned to navigate the recession and is "well capitalized." He also noted strong growth in deposits, as consumers have turned to saving in the face of the downturn and increasing layoffs.
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