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Fifth Third (FITB) Q3 Earnings Beat, Revenues Decline Y/Y

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Fifth Third Bancorp (FITB - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 92 cents, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company reported an EPS of 93 cents.

Results were aided by a rise in non-interest income and deposit balance. However, a fall in net interest income (NII) limited its revenue growth. Higher expenses and a decline in average loan and lease balance were undermining factors.

The company has reported net income available to common shareholders of $623 million, down 1.3% year over year.

Revenues Fall, Expenses Increase

Total revenues in the reported quarter were $2.15 billion, which was marginally down year over year. The top line matched the Zacks Consensus Estimate.

Fifth Third’s NII (on an FTE basis) was $1.45 billion, down 3.8% year over year. The fall was due to the impact of deposit mix shift from demand to interest-bearing accounts, partially offset by the higher loan yields. Our estimate for NII was $1.50 billion.

Net interest margin (NIM) (on an FTE basis) shrunk 24 basis points year over year to 2.98%. Our estimate for NIM was 2.96%.

Non-interest income increased 6.4% year over year to $715 million. This was primarily due to a rise in service charges on deposits, commercial banking revenue, wealth and asset management revenues. Our estimate for the metric was $724.8 million.

Non-interest expenses increased 1.8% to $1.19 billion. An increase in almost all components of expenses resulted in this upsurge, except leasing business costs and other non-interest expenses. Our estimate for the metric was $1.28 billion.

As of Sep 30, 2023, average loan and lease balances and average total deposits were $121.63 billion and $165.64 billion, respectively. Average loans decreased 1.4% on a sequential basis, whereas average deposits increased 3%.

Credit Quality Deteriorates

The company reported a provision for credit losses of $119 million compared with $158 million in the year-ago quarter.

However, net losses charged-off in the third quarter were $124 million or 0.41% of average loans and leases (on an annualized basis) compared with the $62 million or 0.21% witnessed in the prior-year quarter. The total allowance for credit losses increased 10.1% to $2.53 billion. Moreover, total non-performing assets were $618 million, up 13.2% from the year-ago quarter.

Capital Position Strong

Tier 1 risk-based capital ratio was 11.05% compared with the 10.40% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.80%, up from the 9.14% recorded at the end of the year-ago quarter. Also, the leverage ratio was 8.85% compared with the year-earlier quarter’s 8.44%.

Our Viewpoint

The revenues of the company were backed by a rise in non-interest income for this quarter. Its diverse revenue base and strategic acquisitions will likely drive top-line growth in the upcoming period. However, a weakening of credit quality and elevated expenses were matters of concern.

Fifth Third Bancorp Price, Consensus and EPS Surprise

Fifth Third Bancorp Price, Consensus and EPS Surprise

Fifth Third Bancorp price-consensus-eps-surprise-chart | Fifth Third Bancorp Quote

Currently, Fifth Third carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Banks

Wells Fargo & Company’s (WFC - Free Report) third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.

WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.

Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.

In the third quarter, C witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.


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