Webster Financial Corp. of Waterbury, Conn., is joining a growing list of banking companies taking steps to hold down costs.
Webster, known for its steady branch-building, told analysts when it reported fourth-quarter earnings that it will slow the pace this year to trim expenses. It will open six branches this year instead of nine, it said.
"We are very bullish on our de novo program, but we recognize the environment we're operating in requires us to manage the expenses more tightly than we might like," said James C. Smith, Webster's chairman and chief executive.
Webster has nearly 160 branches and has opened 19 since March 2002, including eight last year and two that were to open this past weekend in Westfield, Mass., and West Springfield, Mass.
The newest branches are its first in western Massachusetts and would give it 21 in a state it entered in May 2004, when it acquired FirstFed America Bancorp of Swansea, Mass. It opened its first de novo branch outside of its Connecticut, in Westchester County, N.Y., in March 2004, and has added five more there since. It also opened two in Rhode Island last year to go along with the seven it inherited as part of the FirstFed deal.
"We're making a bit of a sacrifice here by cutting back from nine to six," Mr. Smith said Thursday in the analyst conference call.
The $17.8 billion-asset company is sticking to its plan to open nine branches in 2007 and will look into cutting costs in other areas, he said. He did not elaborate.
Matthew B. Kelley, an analyst at Moors & Cabot Inc., said Webster's decision was "prudent" and a function of the interest rate environment.
"It's a move they had to take," he said. "Operating expense growth over the last couple of quarters was in the upper single digits. The new plan is to get that down into the low single digits."
Many banks have been "taking a two-pronged approach" to cost reduction "by shrinking the balance sheet and shrinking the operating expenses," Mr. Kelley said. "The degree to which people are attacking on both of those fronts will determine their success in '06."
Webster's fourth-quarter earnings rose 179%, to $45.5 million, from the year-earlier period. Earnings per share met the average of analyst estimates of 84 cents.
It attributed the surge net income largely to a balance-sheet deleveraging in the fourth quarter of 2004 that forced it to take a $32.4 million after-tax charge, or 60 cents a share.
A 2-cent charge for an infrastructure and technology upgrade in 2004 affected earnings, but that was mitigated by a 1-cent gain from the sale of securities in the quarter.
Revenue rose 4% from a year earlier, to $187.9 million. Noninterest expenses fell 22.5%, to $119.4 million, reflecting the high cost of the balance-sheet deleveraging in the year-earlier quarter, the company said.
Excluding the costs of that deleveraging, expenses in the fourth quarter rose 9.7%, to $119.4 million, Webster said. It said expenses should be $116 million per quarter this year.
