Hancock Whitney Corporation (NASDAQ:HWC) Q4 2019 Earnings Conference Call - Final Transcript

Jan 16, 2020 • 09:30 am ET

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Hancock Whitney Corporation (NASDAQ:HWC) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And our first question is from Catherine Mealor from KBW. Your line is now open.

Analyst
Catherine Mealor

Thanks. Good morning.

Executive
John M. Hairston

Good morning.

Analyst
Catherine Mealor

Wondering if you could just first start on the fee guide. You said that you believe fees will be up by about 2% to 3% next year, which I think was a little bit lower than what The Street has been modeling. Can you just talk a little bit through how you're getting to that guidance and how we should think about the level of specialty fees that you're including in that guidance versus what we saw in 2019? Thanks.

Executive
Michael M. Achary

Sure, Catherine.

Executive
John M. Hairston

And this is John, and Mike might want to add some color when I'm done. The forward-looking guidance on fees presumes a very static rate environment, which typically is not beneficial for the specialty income. We assume the same thing this time last year, then, of course, things didn't work out that way and fees outperform. So I think it would be fair to say that the guidance maybe a little conservative, depending on what the right environment looks like. That flat rate environment also presumes very little refi mortgage income in it, which may also be a little conservative. So we try to be very honest in what we believe will happen in the coming quarters. And so where our assumptions are that the right environment won't be terribly helpful in fee income that may prove to be conservative.

Mike, do you have anything else you want to add?

Executive
Michael M. Achary

Yeah. Thank you, John. So again, the guidance of 2% to 3% on fees. I think the range there admittedly is on the conservative side. And I think, we certainly have an opportunity to outperform that guidance. As John mentioned, if we look back, especially over the second half of '19 really almost all of our fee income growth was in the specialty lines that John mentioned. So that's things like BOLI derivative fees, our venture capital fees, mortgage banking and syndication. We had absolutely excellent growth in performance and really all of those specialty lines, the second half of '19. And the assumption as we go into '20 is that those fee income lines, while certainly have the potential to repeat that performance. It's just not something that at this point, we feel we can count on with complete confidence. So again, conservative assumption around the guidance and certainly an opportunity to outperform I think.

Analyst
Catherine Mealor

Okay. That's helpful. And then, I appreciate the longer-term CSO goals. As we think about this year, if we kind of piece some of your guidance together, we've got mid-single digit growth with a fairly stable margin and then low-single digit kind of fee growth, which maybe there is upside there, but and then that coupled with this higher 6% to 7% expense growth. It feels like this will be a hard year for you to show positive operating leverage and maybe that's more of a 2021 event. Is that the