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Loan Growth, Higher Rates to Aid KeyCorp's (KEY) Q3 Earnings
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KeyCorp (KEY - Free Report) is slated to announce third-quarter 2018 results on Oct 18, before the opening bell. The company is expected to show some improvement in net interest income (NII), driven by higher interest rates and decent loan growth, while the flattening of the yield curve and higher deposit betas will likely to hamper growth to some extent.
While the overall loan growth in the third quarter was not impressive, commercial and industrial loans witnessed modest rise. Notably, the Zacks Consensus Estimate for average total loans of $89.8 billion for the quarter indicates growth of 1.4% sequentially.
Driven by loan growth, earning assets are also likely to rise. The consensus estimate for average interest earning assets of $124.7 billion for the to-be-reported quarter indicates an increase of 1.1% from the prior-quarter end.
Thus, KeyCorp’s NII, one of the main revenue sources, is expected to support earnings growth. The Zacks Consensus Estimate for NII (tax equivalent basis) of $1 billion for the to-be-reported quarter reflects 1.9% increase on a sequential basis.
Let’s check out the other factors that are expected to influence KeyCorp’s third-quarter performance:
Muted non-interest income growth: KeyCorp’s third-quarter non-interest income will likely benefit from a rise in service charge on deposits as deposit balances are expected to improve.
Seasonal slowdown and lower debt placement activities are expected to hamper BB&T’s investment banking performance to some extent. Also, decline in global M&A deal volume in the quarter will likely hamper the company’s advisory fees to some extent. Nonetheless, strong M&A deal pipeline over the prior quarters will likely provide respite.
Further, mortgage banking fees are not expected to improve much mainly due to a slowdown in refinancing activities due to higher rates and lower mortgage originations.
Thus, because of the above-mentioned factors, BB&T’s non-interest income growth is expected to remain subdued in the third quarter.
Expenses might not provide much support: While KeyCorp’s efforts to diversify products, reorganize operations and exit unprofitable/non-core businesses are likely to save costs, its continued investments in its franchise and inorganic growth strategies are expected to keep overall expenses elevated.
Asset quality to aid results: The consensus estimate for non-performing asset of $547 million indicates a decline of 4.2% sequentially. Likewise, estimates for non-performing loans of $519 million reflect a decrease of 4.8% from the prior quarter.
As KeyCorp is likely to witness rise in loans, a corresponding increase in provision for loan losses is expected. Overall, this is expected to be manageable.
Here is what our quantitative model predicts:
Chances of KeyCorp beating the Zacks Consensus Estimate in the third quarter are low. This is because it doesn’t 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 KeyCorp is -0.90%.
Zacks Rank: KeyCorp currently carries a Zacks Rank #3. But we need to have a positive Earnings ESP to be sure of the earnings beat.
Notably, the Zacks Consensus Estimate for earnings for the to-be-reported quarter is 44 cents, which reflects a year-over-year improvement of 25.7%. Also, the consensus estimate for sales of $1.63 billion indicates 5.9% growth from the prior-year quarter.
Nonetheless, shares of KeyCorp have gained 2.6% for the three months ended Sep 30, 2018, underperforming the industry’s rally of 2.9%.
Stocks That Warrant a Look
Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
People's United Financial, Inc. has an Earnings ESP of +0.30% and holds a Zacks Rank of 2 (Buy). It is slated to report quarterly numbers on Oct 18.
Ameris Bancorp (ABCB - Free Report) has an Earnings ESP of +1.11% and holds a Zacks Rank #3. It is scheduled to report results on Oct 19.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Loan Growth, Higher Rates to Aid KeyCorp's (KEY) Q3 Earnings
KeyCorp (KEY - Free Report) is slated to announce third-quarter 2018 results on Oct 18, before the opening bell. The company is expected to show some improvement in net interest income (NII), driven by higher interest rates and decent loan growth, while the flattening of the yield curve and higher deposit betas will likely to hamper growth to some extent.
While the overall loan growth in the third quarter was not impressive, commercial and industrial loans witnessed modest rise. Notably, the Zacks Consensus Estimate for average total loans of $89.8 billion for the quarter indicates growth of 1.4% sequentially.
Driven by loan growth, earning assets are also likely to rise. The consensus estimate for average interest earning assets of $124.7 billion for the to-be-reported quarter indicates an increase of 1.1% from the prior-quarter end.
Thus, KeyCorp’s NII, one of the main revenue sources, is expected to support earnings growth. The Zacks Consensus Estimate for NII (tax equivalent basis) of $1 billion for the to-be-reported quarter reflects 1.9% increase on a sequential basis.
Let’s check out the other factors that are expected to influence KeyCorp’s third-quarter performance:
Muted non-interest income growth: KeyCorp’s third-quarter non-interest income will likely benefit from a rise in service charge on deposits as deposit balances are expected to improve.
Seasonal slowdown and lower debt placement activities are expected to hamper BB&T’s investment banking performance to some extent. Also, decline in global M&A deal volume in the quarter will likely hamper the company’s advisory fees to some extent. Nonetheless, strong M&A deal pipeline over the prior quarters will likely provide respite.
Further, mortgage banking fees are not expected to improve much mainly due to a slowdown in refinancing activities due to higher rates and lower mortgage originations.
Thus, because of the above-mentioned factors, BB&T’s non-interest income growth is expected to remain subdued in the third quarter.
Expenses might not provide much support: While KeyCorp’s efforts to diversify products, reorganize operations and exit unprofitable/non-core businesses are likely to save costs, its continued investments in its franchise and inorganic growth strategies are expected to keep overall expenses elevated.
Asset quality to aid results: The consensus estimate for non-performing asset of $547 million indicates a decline of 4.2% sequentially. Likewise, estimates for non-performing loans of $519 million reflect a decrease of 4.8% from the prior quarter.
As KeyCorp is likely to witness rise in loans, a corresponding increase in provision for loan losses is expected. Overall, this is expected to be manageable.
Here is what our quantitative model predicts:
Chances of KeyCorp beating the Zacks Consensus Estimate in the third quarter are low. This is because it doesn’t 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 KeyCorp is -0.90%.
Zacks Rank: KeyCorp currently carries a Zacks Rank #3. But we need to have a positive Earnings ESP to be sure of the earnings beat.
Notably, the Zacks Consensus Estimate for earnings for the to-be-reported quarter is 44 cents, which reflects a year-over-year improvement of 25.7%. Also, the consensus estimate for sales of $1.63 billion indicates 5.9% growth from the prior-year quarter.
Nonetheless, shares of KeyCorp have gained 2.6% for the three months ended Sep 30, 2018, underperforming the industry’s rally of 2.9%.
Stocks That Warrant a Look
Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
M&T Bank Corporation (MTB - Free Report) is slated to release results on Oct 18. The company has an Earnings ESP of +0.35% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
People's United Financial, Inc. has an Earnings ESP of +0.30% and holds a Zacks Rank of 2 (Buy). It is slated to report quarterly numbers on Oct 18.
Ameris Bancorp (ABCB - Free Report) has an Earnings ESP of +1.11% and holds a Zacks Rank #3. It is scheduled to report results on Oct 19.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>