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Bank Stock Roundup: PNC, TFC, FITB, BK, CMA & KEY in Focus on Q3 Earnings Beat

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Major banks that reported third-quarter 2021 results this week beat earnings estimates on reserve releases and strength in fee income sources. These aided overall profitability despite the continued low interest-rate environment.

Also, somewhat upbeat management guidance for the last quarter of the year and beyond as well as robust economic growth drove bullish investor sentiments. Thus, bank stocks depicted an optimistic stance over the past five trading days.

During the third quarter, steepening of the yield curve and a modest rise in demand for loans drove net interest income (NII) while banks’ net interest margin growth was hampered by huge deposits in their balance sheets. Also, as banks continued to spend heavily on technology upgrades and undertook efforts to streamline operations, expenses rose during the quarter.

On the fee income front, major banks’ financials got support from the solid performance of investment banking and equity trading businesses, and decent mortgage banking operation while fixed-income trading performance was a bit disappointing. Consumer banking business improved, as reflected in the increase in usage of debit/credit cards and higher consumer confidence.

Reserve release by major banks (driven by improving economic outlook) supported the results. Overall, banks’ balance sheet and liquidity positions remained solid.

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(Read: Bank Stock Roundup for the Week Ending Oct 8, 2021)

Important Earnings of the Week

1. PNC Financial (PNC - Free Report) pulled off a third-quarter 2021 earnings surprise of 3.02% on substantial recapture of credit losses. Adjusted earnings per share (excluding pre-tax integration costs related to the BBVA USA acquisition) of $3.75 surpassed the Zacks Consensus Estimate of $3.64 and improved 42% sequentially.   

2. Truist Financial’s (TFC - Free Report) third-quarter 2021 adjusted earnings of $1.42 per share easily surpassed the Zacks Consensus Estimate of $1.20. The bottom line jumped 46.4% from the prior-year quarter. Results were aided by solid fee income growth, which along with provision benefit, acted as a tailwind.

3. Fifth Third Bancorp (FITB - Free Report) reported third-quarter 2021 adjusted earnings (excluding the after-tax impact of certain items) of 94 cents per share, beating the Zacks Consensus Estimate of 91 cents. Revenue growth, aided by fee income and NII, and benefit from credit losses were the tailwinds. However, marginally higher expenses and lower loan balance played spoilsport.

4. Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2021 earnings of $1.04 per share beat the Zacks Consensus Estimate of $1.02. Results gained from provision benefit and higher fee income. However, a fall in NII, an increase in fee waivers, and higher expenses were the undermining factors.

5. Comerica Incorporated (CMA - Free Report) delivered a third-quarter 2021 earnings surprise of 13.10%. Earnings per share of $1.90 easily surpassed the Zacks Consensus Estimate of $1.68. Results were supported by benefits from provisions, and NII and fee income growth. Yet, a reduction in loan volumes, higher expenses, and weak capital position were major concerns.

6. KeyCorp’s (KEY - Free Report) third-quarter 2021 earnings of 65 cents per share handily surpassed the Zacks Consensus Estimate of 57 cents. Results benefited from a rise in revenues and provision benefit. However, lower rates, a decline in loan balance, and an increase in operating expenses were the undermining factors.

Price Performance

Here is how the seven major stocks performed:

Zacks Investment ResearchImage Source: Zacks Investment Research

Over the past five trading days, both PNC Financial and Wells Fargo recorded maximum gains, with their shares rallying 6.8% and 4%, respectively. On the other hand, shares of both Citigroup and Capital One have declined 2.5% and 1.6%, respectively, during the same period.

Over the past six months, shares of Capital One and PNC Financial have jumped 25.9% and 23%, respectively, while Bank of America has gained 22.1%.


What’s Next?

Over the next five trading days, third-quarter earnings for banks will continue in full swing. BancorpSouth Bank and Bank of Hawaii will report quarterly numbers on Oct 25, Capital One on Oct 26, Prosperity Bancshares, Inc. on Oct 27, Huntington Bancshares and Hilltop Holdings on Oct 28, among others.