UMB Financial Corporation (NASDAQ:UMBF) is a financial services company that provides banking, asset management, and related financial services. It operates primarily in the United States and competes with other financial institutions like Westamerica Bancorporation, United Bankshares, Commerce Bancshares, Wintrust Financial, and Trustmark Corporation. These companies are evaluated based on their ability to generate returns relative to their cost of capital.
UMB Financial's Return on Invested Capital (ROIC) is 2.01%, while its Weighted Average Cost of Capital (WACC) is 16.35%. This results in a ROIC to WACC ratio of 0.12, indicating that UMBF is not generating returns that exceed its cost of capital. This suggests inefficiency in capital utilization compared to its peers.
In contrast, Westamerica Bancorporation (WABC) shows a ROIC of 12.40% and a WACC of 7.04%, leading to a ROIC to WACC ratio of 1.76. This indicates that WABC is generating returns well above its cost of capital, showcasing efficient capital utilization. Similarly, Commerce Bancshares (CBSH) has a ROIC to WACC ratio of 1.04, with a ROIC of 8.28% and a WACC of 7.95%.
Trustmark Corporation (TRMK) stands out with a remarkable ROIC of 47.58% against a WACC of 16.26%, resulting in a ROIC to WACC ratio of 2.93. This highlights TRMK as the most efficient in generating returns relative to its cost of capital among the peers. This efficiency is a significant advantage in the competitive financial services industry.
United Bankshares (UBSI) and Wintrust Financial (WTFC) have ROIC to WACC ratios of 0.17 and 0.39, respectively. While both companies have higher ratios than UMBF, they still fall short of the efficiency demonstrated by Trustmark Corporation. This comparison underscores the varying levels of capital efficiency within the financial sector.
