Newtek Business Services ((NEWT)) has held its Q4 earnings call. Read on for the main highlights of the call.
NewtekOne’s recent earnings call painted a picture of robust financial health, marked by significant improvements in profitability and a promising growth trajectory in loans and deposits. Despite some concerns over potential credit risks and macroeconomic challenges, the company remains optimistic, underscoring its confidence with a positive earnings forecast.
Strong Financial Performance
NewtekOne reported impressive financial results, with earnings per basic share reaching $0.70 and $0.69 per diluted share, reflecting a 43% improvement over the previous year and quarter. The company’s net interest income also saw a substantial increase of 36% compared to the same period last year, showcasing its strong financial footing.
Growth in Loan and Deposit Accounts
The company demonstrated robust growth in its loan and deposit accounts, with $269 million in loans for the year. Core business deposits grew to $216 million, marking an increase of approximately $106 million from the previous year. This growth underscores NewtekOne’s expanding market presence and customer base.
High ROAA and ROTCE
Newtek Bank reported exceptionally strong metrics with a Return on Average Assets (ROAA) of 6.3% and a Return on Tangible Common Equity (ROTCE) of 48%. The bank’s efficiency ratio of 42% further highlights its operational effectiveness and profitability within the banking industry.
Positive Earnings Forecast
The company has raised its earnings per share forecast for 2025 to a range of $2.10 to $2.50, up from a previous forecast of $2.00. This optimistic outlook is supported by plans for $1 billion in SBA 7(a) loan originations and significant bond sales, indicating confidence in sustained growth.
Credit Concerns
Despite the positive outlook, NewtekOne acknowledged potential credit risk challenges, with an expectation of higher charge-off rates in the bank portfolio. The anticipated increase from 1.5% to 2% in 2025 suggests a cautious approach to managing credit risks.
Unfavorable Macroeconomic Conditions
The company noted the challenging macroeconomic environment, including higher interest rates and inflation, which could adversely affect its client base. These conditions necessitate strategic adjustments to mitigate potential impacts on financial performance.
NSBF Portfolio Drag
The NSBF portfolio, currently in runoff mode, presents a challenge to NewtekOne’s financial performance due to higher financing costs and non-cash write-offs. This aspect requires careful management to minimize its impact on overall profitability.
Forward-Looking Guidance
In its Fourth Quarter 2024 Earnings Conference Call, NewtekOne provided robust guidance, highlighting a 43% year-over-year increase in earnings per share. With a strong return on average assets and equity, the company anticipates further growth in 2025, driven by significant loan originations and bond sales, reinforcing its positive outlook.
In summary, NewtekOne’s earnings call reflects a company in a strong financial position, with notable growth in loans and deposits, and a positive earnings forecast. While challenges such as credit risks and macroeconomic conditions persist, the company’s strategic initiatives and robust guidance suggest a promising path forward.