Webster’s Growth Outlook Stays Grounded Despite Strong 2025 Results

Date of Call: Jan 23, 2026

Financials Results

• EPS: EPS up 10% over the prior year

Guidance:

• Loan growth of 5% to 7% expected for 2026.
• Deposit growth of 4% to 6% expected for 2026.
• Revenue expected to be $3 billion (midpoint).
• Net interest income expected to be $2.57B to $2.63B, assuming 225 bps Fed fund cuts.
• Fees expected to be $390M to $410M.
• Expenses expected to be $1.46B to $1.48B.
• Net interest margin (NIM) expected to be around 3.35% for the year.

Business Commentary:

Financial Performance and Strategic Investments:

• Webster Financial Corporation reported a 17% ROATCE and a 1.2% ROAA for the full year 2025, with EPS up 10% from the previous year.
• The company grew loans by 8% and deposits by 6%, while its tangible book value per share increased by 13%.
• The strong financial results were achieved despite a macroeconomic backdrop that was often uncertain, with a strategic focus on execution, client service, and enhancing the bank's operating capabilities.

Loan and Deposit Growth Outlook:

• For the year 2026, Webster anticipates loan growth of 5% to 7% and deposit growth of 4% to 6%.
• The forecast reflects a balanced approach to growth, focusing on maintaining profitability and return on equity.
• Growth is expected to be driven by strong origination capabilities across diverse asset classes and ongoing investments in nontraditional banking verticals.

HSA Bank and Health Care Services Growth:

• Webster expects $1 billion to $2.5 billion in incremental deposit growth at HSA Bank over the next five years, with $50 million to $100 million in 2026.
• The growth is anticipated from newly HSA-eligible plan participants, with an acceleration in account openings through the direct-to-consumer channel.
• Investments in technology and enhancements to enrollment systems are expected to drive this growth.

Credit Quality and Risk Management:

• Webster reported a 5% decline in commercial classified loans year-over-year, with net charge-offs at 35 basis points.
• The improvement in credit quality is attributed to aggressive remediation efforts and solid asset quality trends.
• This sets a foundation for continued stable credit performance and supports the company's risk mitigation framework.

Regulatory Environment and Strategic Flexibility:

• The company noted that changes in regulatory guidance, such as the withdrawal of leverage lending rules, provide more flexibility.
• This allows Webster to engage in more tailored banking activities, potentially leading to better service for its clients.
• The regulatory developments align with a constructive environment that supports strategic growth and adaptability.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'strong financial results,' 'robust capital levels,' and entering 2026 'on our front foot.' They noted 'solid asset quality trends,' 'positive momentum' from macro/regulatory tailwinds, and being 'positioned to prosper into the future.'

Q&A:

• Question from Jared David Shaw (Barclays Bank PLC): On the loan growth side or outlook, can you just give an update on how the partnership with Marathon is influencing that? And maybe where things stand there now that we've -- in a couple of quarters?
  Response: The JV is live but not yet materially impacting loan growth; it's baked into forecasts with an expectation of potential upside if more sponsor business wins are secured.

• Question from Jared David Shaw (Barclays Bank PLC): Looking at the expense trends and some of the investments you called out in systems and taking advantage of the bronze opportunity. Is most of that marketing and sort of client outreach? Or is there any system change that you're contemplating to bring on more of those individuals?
  Response: Investments are mostly in marketing to identify and educate direct-to-consumer HSA account holders; significant technology buildout is already complete.

• Question from Mark Fitzgibbon (Piper Sandler & Co.): Let's suppose the Category 4 threshold is lifted meaningfully sometime soon. I know you'll be able to reduce sort of that annual cost number by, pick a number, $20 million, $30 million. But I guess I'm curious strategically how that might change your plans for the company?
  Response: Strategically, it doesn't change growth plans but provides flexibility to increase profitability or redirect savings into revenue-generating investments.

• Question from Mark Fitzgibbon (Piper Sandler & Co.): Separately, Neal, I wonder if you could help us think through the NIM trajectory in the early part of 2026.
  Response: NIM expected to maintain an exit rate of 3.35% for the full year, with normal seasonal variability around that midpoint.

• Question from Matthew Breese (Stephens Inc.): John, at a recent event, you noted that you and the Webster team can be a bit more aggressive on deposit pricing. Hoping you could provide just a bit more color there. How much more room do you see to lower deposit costs, absent rate cuts this year? And if you have it, what was the period end cost of deposits?
  Response: Deposits ended at 1.91% average cost; more aggressive pricing was implemented in Q4, but competition remains strong.

• Question from Matthew Breese (Stephens Inc.): And then just thinking about loan growth as it relates to reserve, maybe first, what are current spreads on commercial real estate and C&I? And do you expect to grow in some of these lower risk sectors in 2026, resulting in further reductions in the reserve as a percentage of loans?
  Response: Credit spreads have tightened 30-50 bps over 18 months; growth in lower-risk sectors like stabilized CRE and public sector finance may improve portfolio risk profile and allow for reserve reductions.

• Question from Jackson Singleton (Autonomous Research): Just starting out, I hear your thoughts on Marathon, but I also wanted to follow up on loan growth. I mean just given 11% annualized growth in 4Q and really just strong growth in all of 2026. It feels like the guide is still a little conservative. So just wondering if you can maybe provide some thoughts on kind of why the 5% to 7%.
  Response: The guide balances maintaining profitability; normalizing for lower-than-expected payoffs and focusing on core franchise-building loans, with potential upside if sponsor business picks up.

• Question from Jackson Singleton (Autonomous Research): And then just my follow-up is on loan-to-deposit ratio. So the deposit guide -- the midpoint of the deposit guide's a little bit lower than the midpoint of the loan guide. So just wondering maybe is there any kind of ceiling for the loan-to-deposit ratio that you guys wouldn't want to go past. And then maybe how should we think about the mix of deposit growth in 2026?
  Response: No formal ceiling, but management is comfortable in the low-to-mid 85% range; deposit mix similar to 2025, with added HSA growth from bronze opportunity and strong Ametros performance.

• Question from Christopher O'Connell (Keefe, Bruyette, & Woods, Inc.): This is Chris O'Connell filling in for Chris. Just wanted to start off just quickly on the balance sheet on the liability side. On a period basis, there seem to be a bit of movement outsized here and there on the borrowing side. Anything driving that outside of seasonality in kind of the movement of the sub debt in the quarter?
  Response: Movements were due to seasonality (e.g., public funds outflows, sub-debt issuance) and broker deposits; nothing unusual.

• Question from Christopher O'Connell (Keefe, Bruyette, & Woods, Inc.): And then on the fee guide, if I'm reading the numbers correct on a year-over-year basis, it's a little bit of a wide range, 1% to nearly high single digits. Can you just maybe frame some of the drivers in growth for next year? And kind of what would push you towards the lower or higher end of the upside?
  Response: Core fee areas expected steady 2-4% growth; variability from BOLI, CVA, and direct investments; loan-related fees could push to high end if origination momentum continues.

• Question from David Chiaverini (Jefferies LLC): Wanted to start on HSA. How did the open enrollment season go? Because I know that normally leads to a nice bump in deposits in the first quarter.
  Response: Open enrollment is ahead of last year with ~15,000 more accounts opened; momentum is good in employer channel, with direct-to-consumer growth expected to accelerate through the year.

• Question from David Chiaverini (Jefferies LLC): Great. And then shifting over to capital management. Nice uptick in the buyback activity in the fourth quarter. Can you talk about the pace looking forward on the buybacks, and I see your CET1 11.2%, with the near-term target 11% and long-term target 10.5%. Can you talk about the timing of bringing that CET1 down?
  Response: Expect another active buyback year like 2025; likely to move CET1 target down after stress testing in Q1-Q2, more comfortable reaching 11% ratio as economic momentum continues.

• Question from Daniel Tamayo (Raymond James & Associates, Inc.): Maybe we can start on the credit. I know that's not as pressing that topic as it has been, but new year, maybe just kind of reset expectations and give your latest thoughts on the office book and what that could look like? Is there any further sales, et cetera, for the coming year?
  Response: Office portfolio (~$720M) is ring-fenced with appropriate reserves; no significant deterioration expected, and resolution of nonaccruals will be managed within 25-35 bps annualized charge-off rate.

• Question from Daniel Tamayo (Raymond James & Associates, Inc.): Okay. Great. Yes. That's great color. And then we've talked a lot about the deposit portfolio today. The noninterest-bearing side, obviously tied to commercial loan growth, but really has continued to trend down for reasons that you're growing in other areas. You had a lot of growth opportunities, understandably, but that has kind of continued to trend down over the last few years and quarters. Just curious if you see a bottom from a mix perspective with noninterest-bearing anytime soon?
  Response: Slowing reductions in noninterest-bearing deposits; close to inflection point, especially in health care services which grew $450M; still focused on core commercial/consumer relationships.

• Question from David Smith (Truist Securities, Inc.): You had mentioned that deposit competition was elevated in a lot of your geographic footprint right now. I'm wondering if you could just help us frame within your broader footprint, what areas you're seeing more or less competition from a geography standpoint?
  Response: Competition is elevated across consumer CDs, direct bank, and commercial deposits; Webster moved pricing down at last rate cut and will remain aggressive while balancing liquidity and NIM.

• Question from Manan Gosalia (Morgan Stanley): You noted earlier on that loan yields were better this quarter than you previously anticipated. Can you talk about what's driving that? You also mentioned that credit spreads have tightened. So it seems like the loan growth is coming in higher-yielding categories. I guess, 2-part question. Is that right? And if that is, then what is baked into the flattish NIM trajectory that you just spoke about?
  Response: Better loan performance was due to lower-than-expected payoffs, not yields; spreads have tightened on higher-quality assets, but NIM guide assumes stable spreads with potential for slight tightening if rate cuts continue.

• Question from Manan Gosalia (Morgan Stanley): Got it. Perfect. And then just wanted to get your thoughts on the leverage lending guidance being withdrawn. Does that help loan growth a little bit as you look out the next 2 or 3 years, and does that help you do more with clients that you already have a deep relationship with?
  Response: Withdrawn guidance provides more flexibility but is not a material driver for growth or profitability outlook; may allow 3-5 additional optimal transactions in sponsor book.

• Question from Bernard Von Gizycki (Deutsche Bank AG): Just my first question, sorry if I missed this, but I think you acquired SecureSave in December, which adds employer-sponsored emergency savings accounts. Can you just talk more on the acquisition, sizing of the deal, any economics or any color you can share on that?
  Response: SecureSave is a small, market-leading ESA provider; acquisition adds low-cost deposit gathering for large employers and is already integrated; more details on deposit growth to come.

• Question from Bernard Von Gizycki (Deutsche Bank AG): Okay. Great. And just a follow-up. So what is your appetite on further deals? And how actively are you looking at them? And any color on like pricing? And is it just harder to find these types of like bolt-ons to add to the HSA business?
  Response: Actively looking for tuck-ins to enhance deposit gathering and fee income; disciplined on pricing and deal terms; has successful track record (e.g., Bend, InterSYNC, Ametros) but finds it challenging due to competition.

• Question from Jon Arfstrom (RBC Capital Markets): Neal, a question for you on expenses. It looks like the fourth quarter run rate, the core run rate puts you at the low end of the '26 guide, which is fine. But what do you think the slope looks like for the year on expenses?
  Response: Q1 expenses up a few percentage points seasonally due to payroll taxes, merits, and benefits; relatively stable thereafter with neutral to slight increases.

• Question from Jon Arfstrom (RBC Capital Markets): Okay. Good. That helps. And then back on growth, I heard your comments on less payoffs maybe caused an aberration in growth. But do you have any reason for the lower payoff activity? And it also looks like the way I see it, originations in commercial and commercial real estate are up pretty nicely. Is that seasonal? Or is there something else going on there?
  Response: Lower payoffs due to seasonality and later-than-expected rate moves; pipeline built up in 2025, with seasonal fluctuations expected; growth trajectory may vary but pipelines are solid.

• Question from Anthony Elian (JPMorgan Chase & Co): On the loan growth and deposit growth outlook, are you anticipating the growth within those ranges spread evenly throughout this year? Or do you think the growth will be more first half or second half weighted?
  Response: Difficult to predict seasonality; typically Q4 is strongest, but modeling even growth trajectory is acceptable with variability based on payoffs.

• Question from Anthony Elian (JPMorgan Chase & Co): Okay. And then on HSA and the $1 billion to $2.5 billion incremental deposit growth you could see from the bill over the next 5 years, is all the necessary infrastructure technology in place to support that growth? Or is there any further buildout required?
  Response: All necessary technology is in place and scalable; no incremental buildout required to support projected HSA deposit growth.

Contradiction Point 1

Marathon JV Impact on Loan Growth and Financials

Guidance on the joint venture's material impact is deferred, affecting expectations for loan growth and financial performance.

How is the partnership with Marathon impacting loan growth, and what's the current status after a couple of quarters? - Jared David Shaw (Barclays Bank PLC)

2025Q4: The JV with Marathon is live and operational but has not yet materially impacted loan growth trajectory. The impact on loan growth and financial performance in 2026 is seen as a potential upside opportunity. - John Ciulla(CEO)

Are there early successes in the Marathon JV contributing to optimism for growth in 2025 and 2026? - Jared Shaw (Barclays)

2025Q3: For 2026, it is expected to allow for expanded product offerings, resulting in on-balance sheet business, deposits, fees, and capital markets opportunities. - Luis Massiani(CFO)

Contradiction Point 2

Net Interest Margin (NIM) Trajectory and Drivers

Explanation for the NIM exit rate and 2026 outlook shifts from an opportunity to a maintained rate.

Could you provide insights on the NIM trajectory for early 2026? - Mark Fitzgibbon (Piper Sandler & Co.)

2025Q4: The NIM is expected to maintain an exit rate of 3.35% for the full year 2026, with normal seasonal variability. - William Holland(CFO)

What is the Q4 exit NIM run rate considering higher debt costs and $630M NII guidance? - Bernard Von Gizycki (Deutsche Bank)

2025Q3: The $630M NII equates to a ~3.35% NIM. There is opportunity to outperform if deposit repricing lags. - William Holland(CFO)

Contradiction Point 3

Capital Management Strategy and CET1 Target

Timeline and confidence for reaching the long-term CET1 target appear inconsistent.

What is the expected pace of buybacks moving forward, and what is the timeline for reducing CET1 from 11.2% to the near-term target of 11% and long-term target of 10.5%? - David Chiaverini (Jefferies LLC)

2025Q4: The move to the long-term 10.5% CET1 target is more likely after the upcoming stress testing and capital management exercise in Q1/Q2. The company is more confident in reaching the 11% target this year. - John Ciulla(CEO)

Given the current environment and potential deregulation, what is your willingness to reduce CET1 and your outlook on the near-term buyback pace? - Andrew Leischner (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q2: The medium-term and short-term goal for CET1 is 11%, with the potential to move back to a 10.5% range over the long term as markets stabilize. - John R. Ciulla(CEO)

Contradiction Point 4

HSA Business Growth Infrastructure

Statements on required investment for the HSA opportunity conflict, moving from no significant changes to stating necessary tech infrastructure is in place.

How would you characterize deposit competition across your geographic regions, particularly where it's more intense versus less so? - David Smith (Truist Securities, Inc.)

2025Q4: The necessary technology infrastructure is already in place and scalable. The company has made the required investments to handle a potential surge in direct-to-consumer account openings at no incremental cost. - John Ciulla(CEO)

Does the expansion of the total addressable market require investments in new delivery or outreach channels, and how should we consider the associated expenses? - Jared Shaw (Barclays Bank PLC, Research Division)

2025Q2: No material changes to HSA expense trajectory are required. The company already has a direct-to-consumer channel. The new provisions will require marketing and education spend to reach newly eligible consumers, but there will be no significant changes in technology or operations. - Luis R. Massiani(COO)

Contradiction Point 5

Loan Growth and Credit Outlook

Guidance for loan growth becomes more conservative despite strong recent growth, shifting from 4-5% to 5-7%.

Given 4Q's 11% annualized growth and strong 2026 performance, why is the 5% to 7% guidance considered conservative? - Jackson Singleton (Autonomous Research, on for Casey Haire)

2025Q4: The 5-7% loan growth guide balances profitability and franchise value. - John Ciulla(CEO)

Could you provide an update on loan growth, pipeline, CRE appetite, Marathon JV expectations, and residential growth? - Matthew Breese (Stephens)

2025Q1: Pipelines are solid, with 4-5% loan growth expected for the year. - John Ciulla(CEO)