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Will Low Fee Income Mar People's United (PBCT) Q1 Earnings?

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People's United Financial, Inc. is scheduled to report first-quarter 2021 results on Apr 22. While its revenues are expected to have declined year over year, earnings might have improved.

Before we discuss the factors that are likely to have influenced the company’s performance, let’s take a look at how it performed in the last reported quarter.

People's United posted earnings beat in fourth-quarter 2020. Lower expenses, along with higher fee income, were partially offset by elevated provisions.

In the trailing four quarters, the company surpassed estimates on three occasions and posted in-line results in the other, the average beat being 20.2%.

The Zacks Consensus Estimate for its earnings for the to-be-reported quarter is pegged at 34 cents, which suggests a rise of 3.03% from the year-ago reported number. However, the consensus estimate for sales of $485.7 million indicates a 6.56% decline.

Factors at Play

Soft Loan Growth: Per the Fed’s latest data, the company’s loan balance is likely to have improved on a sequential basis for the March-end quarter, supported by rise in commercial and industrial (C&I) and consumer loans.

Muted Net Interest Income (NII): A decent lending scenario during the quarter is likely to have supported the NII. Also, the Zacks Consensus Estimate for average earning assets of $55.2 billion for the quarter indicates 6.6% year-over-year growth.

Moreover, interest rates at near-zero level are likely to have hurt’ People’s United’s net interest margin, thereby impacting NII. However, steepening of the yield curve (the difference between short and long-term interest rates) might have offered some support.

The Zacks Consensus Estimate of $395 million for NII suggests a 2.2% fall from the year-ago quarter.

Fee Income: A sluggish resumption in economic activities in the quarter is likely to have strained fee income to some extent. The consensus estimate of $11.67 million for commercial lending fees suggests a fall of 3.5% from the prior-year quarter.

The Zacks Consensus Estimate for bank service charges is $24.89 million, suggesting an 11.1% year-over-year fall.

However, continued strength in equity markets, driven by a spike in volatility and higher client activities, is likely to have boosted the company’s investment management fees. The Zacks Consensus Estimate for investment management fees calls for a 1.2% year-over-year improvement.

The consensus estimate for non-interest income is $94 million, indicating a 24.2% year-over-year fall.

Higher Expenses: People’s United’s inorganic growth strategies are likely to have resulted in higher merger-related costs. Also, with the expansion of operations, compensation and benefits might have risen.

Earnings Whispers

The chances of People’s United beating the Zacks Consensus Estimate in the first quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for People’s United is -5.26%.

Zacks Rank: People’s United currently has a Zacks Rank of 3.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

BankUnited (BKU - Free Report) is scheduled to release earnings on Apr 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.64%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Invesco (IVZ - Free Report) is +1.06% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly numbers on Apr 27.

Capital One Financial Corporation (COF - Free Report) is slated to report quarterly results on Apr 27. The company currently has an Earnings ESP of +4.01% and a Zacks Rank of 3.

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