People's United in Bridgeport, Conn., has started a payments firm in partnership with Vantiv in a move that aided the company's quarterly results.
The newly formed People's United Merchants Services will offer a full suite of payments services, the $33.3 billion-asset company said in its July 17 earnings release. People's United has a 49% stake in the venture, which will combine the company's "strong reputation and broad access to commercial merchants with Vantiv's deep payments expertise," Chief Executive Jack Barnes said in the release.
The business gave People's United a much-needed earnings jolt. The $34 billion-asset company recorded a $21 million gain on the venture, representing the value of the merchant contracts People's United contributed the partnership.
That gain helped People's United beat its earnings estimates despite a steep decline in gains on loan sales. The company's quarterly profit rose 16% from a year earlier, to $72.3 million. Earnings per share of 24 cents were 4 cents above the average forecast of analysts polled by Bloomberg.
People's United's net interest income rose 3%, to $228.2 million, led by an improvement in residential mortgage revenue. Overall, the loan book grew by 11%, to $25.5 million. The net interest margin compressed by 20 basis points, to 3.13%.
Noninterest income rose 13%, to $100.1 million, because of the gain from forming the payments company. Apart from that one-time gain, service charges and wealth-management income crept higher, while loan sales swung from a $10 million gain to a $400,000 loss.
Noninterest expense rose by 1%, to $208.3 million, as compensations costs increased.