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Fifth Third (FITB) to Report Q2 Earnings: What to Expect?
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report its second-quarter 2016 results on Jul 28, before the opening bell.
The Ohio-based banking giant’s first-quarter 2016 earnings beat the Zacks Consensus Estimate. Results were aided by higher revenues, partially offset by increased expenses as well as provisions. The quarter also exhibited consistent growth in loans and deposit balances as well as a strong capital position.
Notably, Fifth Third delivered average positive earnings surprise of 5.33% in the trailing four quarters.
However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) – for increasing the chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Fifth Third is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate, both, stand at 37 cents.
Zacks Rank: Fifth Third’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Activities of Fifth Third during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 37 cents over the last seven days.
What to Expect?
During the second quarter, Fifth Third continued with its restructuring measures announced in Jun 2015. In April, the company closed the sale of its retail business, including retail accounts, private banking deposits and related loan relationships in Pittsburgh, to First National Bank of Pennsylvania. The sale was announced last September.
The sale included loans, premises and equipment, and deposits with aggregate carrying amounts of about $99 million, $16 million and $302 million, respectively. The company recorded a gain on the sale of about $11 million that will be recognized in the second quarter 2016 results.
We do not expect significant improvement in net-interest income amid the still low rate environment. Notably management expects net interest income to remain stable on a sequential basis in the second quarter; however, it is anticipated to increase 2.5% to 3% on a year over year basis. Net interest margin is likely to exhibit decline of 2 to 3 basis points in the quarter due to lower yields on new originations.
Fee income in the second quarter should be bolstered from seasonally higher mortgage banking revenue reflecting higher originations on the back of stronger purchase as well as refinance volumes.
Regarding expenses, the quarterly run rate will increase from the first quarter levels and will reflect seasonality and the timing of implementation of strategic initiatives. The quarter will include $10 million one-time expense as a result of retirement eligibility changes related to long-term incentive compensation. Management believes, going forward, the change is likely to reduce expenses.
Excluding energy portfolio, credit losses are expected to remain stable, with some probable variability, due to the historically low-level of current charge-offs.
Stocks That Warrant a Look
Here are some stocks worth considering, as according to our model they have the right combination of elements to post an earnings beat this quarter.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. The company is expected to release results on Jul 27.
LPL Financial Holdings Inc. (LPLA - Free Report) , which is expected to report on Jul 28, has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and carries a Zacks Rank #3. It is scheduled to report results on Jul 28.
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Fifth Third (FITB) to Report Q2 Earnings: What to Expect?
Fifth Third Bancorp (FITB - Free Report) is scheduled to report its second-quarter 2016 results on Jul 28, before the opening bell.
The Ohio-based banking giant’s first-quarter 2016 earnings beat the Zacks Consensus Estimate. Results were aided by higher revenues, partially offset by increased expenses as well as provisions. The quarter also exhibited consistent growth in loans and deposit balances as well as a strong capital position.
Notably, Fifth Third delivered average positive earnings surprise of 5.33% in the trailing four quarters.
FIFTH THIRD BK Price and EPS Surprise
FIFTH THIRD BK Price and EPS Surprise | FIFTH THIRD BK Quote
However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) – for increasing the chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Fifth Third is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate, both, stand at 37 cents.
Zacks Rank: Fifth Third’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Activities of Fifth Third during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 37 cents over the last seven days.
What to Expect?
During the second quarter, Fifth Third continued with its restructuring measures announced in Jun 2015. In April, the company closed the sale of its retail business, including retail accounts, private banking deposits and related loan relationships in Pittsburgh, to First National Bank of Pennsylvania. The sale was announced last September.
The sale included loans, premises and equipment, and deposits with aggregate carrying amounts of about $99 million, $16 million and $302 million, respectively. The company recorded a gain on the sale of about $11 million that will be recognized in the second quarter 2016 results.
We do not expect significant improvement in net-interest income amid the still low rate environment. Notably management expects net interest income to remain stable on a sequential basis in the second quarter; however, it is anticipated to increase 2.5% to 3% on a year over year basis. Net interest margin is likely to exhibit decline of 2 to 3 basis points in the quarter due to lower yields on new originations.
Fee income in the second quarter should be bolstered from seasonally higher mortgage banking revenue reflecting higher originations on the back of stronger purchase as well as refinance volumes.
Regarding expenses, the quarterly run rate will increase from the first quarter levels and will reflect seasonality and the timing of implementation of strategic initiatives. The quarter will include $10 million one-time expense as a result of retirement eligibility changes related to long-term incentive compensation. Management believes, going forward, the change is likely to reduce expenses.
Excluding energy portfolio, credit losses are expected to remain stable, with some probable variability, due to the historically low-level of current charge-offs.
Stocks That Warrant a Look
Here are some stocks worth considering, as according to our model they have the right combination of elements to post an earnings beat this quarter.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. The company is expected to release results on Jul 27.
LPL Financial Holdings Inc. (LPLA - Free Report) , which is expected to report on Jul 28, has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and carries a Zacks Rank #3. It is scheduled to report results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>