Despite a very profitable quarter, analysts pressed Webster Bank executives on the sustainability of its health savings accounts business, specifically as lawmakers consider the future of health care.
Webster has its own HSA bank and has become a leader in the space – at the end of the first quarter of 2019, the company had has almost $8 billion in total HSA footings and roughly 3 million accounts.
Webster President and CEO John Ciulla has previously said that he would be comfortable with the HSA business comprising half of all Webster’s deposits at some point.
Health care stocks have “been feeling the burn” over calls by Democratic presidential candidates such as Bernie Sanders pitching health care plans like Medicare for all, which could potentially eliminate private health care insurance and HSAs.
Webster executives have thought about the issue over the years and do not think it likely that anything passed by lawmakers would significantly disrupt the HSA business, because it is a product that has bipartisan support, Ciulla said in response to analyst questions.
“I mean, you think about a cost of a full replacement on a program like that, you think about where the political will and the support really is in aggregate for it and the fact that the current employer paid and insurance paid healthcare system works for most of America,” Ciulla said on the earnings call. “We think that the probability is pretty remote that you’re going to get something like Sen. Sanders and others have talked about in town hall forums.”
Ciulla also said that with more than 25 million-plus HSA accounts, the product is embedded in the health care system similar to the way the 401(k) plan is embedded in retirement savings, making it less likely to be legislatively eliminated or driven away.
“It lets people manage their own health care and ultimately drive down health care costs,” he said. “So our view from where we sit here in Waterbury is that any modification or enhancements or changes to the overall health care system should and will likely include HSAs as part of the solution.”
Asked about his earlier statements about the importance of HSA business to Webster’s portfolio, Ciulla said the 50 percent figure was “not a hard and fast rule.
“Given the optionality we have over time with respect to deploying those funds or even brokering them out, from a concentration risk perspective, that’s probably a good indicator,” he said.
Aside from the skepticism on the overall HSA business, Webster had a very successful start to the year.
The company reported net income of $97.5 million, or $1.06 per diluted share, for the first quarter of 2019, compared to $78.1 million, or $0.85 per diluted share, for the first quarter of 2018. Net interest income in the quarter was $241.6 million, an increase of 12.8 percent from the year before, and the margin grew to 3.74 percent, up 30 basis points from one year prior.
Ciulla said deposits in the quarter grew at a faster clip than most commercial banks as a whole and total loans were up more than $1 billion year-over-year, reaching more than $18.8 billion. The company saw increases in most loan categories except for consumer loans, which were down more than $180 million year-over-year.
Non-interest income was $68.6 million, down slightly from the first quarter of 2018.
The provision for loan losses in the quarter was $8.6 million, down $2.4 million from the first quarter of 2018. Total nonperforming assets as a percentage of total assets was 0.87 percent, compared to 0.79 percent one year ago.
