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Fifth Third (FITB) Q4 Earnings Top Estimates, Loan & NII Rise

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Fifth Third Bancorp (FITB - Free Report) has reported fourth-quarter 2021 earnings (excluding after-tax impacts of certain items) of 93 cents per share, beating the Zacks Consensus Estimate of 91 cents. Including the impact of these items, earnings per share were 90 cents per share, indicating a 15% year-over-year rise.

The company’s performance displays revenue growth, aided by fee and net interest income (NII). Also, benefits from credit losses were tailwinds. However, margin contraction and capital position deterioration played spoilsports.

The company reported net income available to common shareholders of $627 million compared with the $569 million witnessed in the prior-year quarter.

For 2021, earnings per share were $3.73 compared with the prior-year figure of $1.83.

Revenues & Loans Rise, Costs Declines

Total revenues (on a fully taxable-equivalent or FTE basis) for the reported quarter were $1.99 billion, up marginally year over year, driven by higher fees and NII. However, the revenue figure missed the Zacks Consensus Estimate of $2.01 billion.

For 2021, total revenues grew 4% from the prior year to $7.9 billion. The top line missed the Zacks Consensus Estimate of $7.91 billion.

Fifth Third’s NII (on a FTE basis) was $1.20 billion, up 1% year over year. It primarily reflects the benefits of the Government National Mortgage Association forbearance loan buyout purchases, lower deposit costs, a fall in long-term debt, and higher indirect secured consumer loan balances. This was partially offset by lower commercial and industrial, home equity, and construction balances, and the impacts of lower market rates.

Net interest margin (on a FTE basis) shrunk 3 basis points (bps) year over year to 2.55%, loan spread compression and decline in market rates.

Non-interest income climbed 1% year over year to $791 million. A rise in the majority of the components was offset by net securities losses and a decline in other non-interest income.

Non-interest expenses decreased 2% from the prior-year quarter to $1.21 billion. Lower net occupancy expenses, card and processing expenses, and leasing business expenses chiefly resulted in the decline.

As of Dec 31, 2021, average loan and lease balances, and average total deposits were at $109.49 billion and $167.54 billion, respectively. Loans increased 1.4%, whereas deposits improved 3% on a sequential basis.

Credit Quality Improves

The company reported benefits from credit losses of $47 million compared with the benefits of $13 million seen in the year-ago quarter. Net charge-offs for the fourth quarter were $38 million or 14 bps of average loans and leases on an annualized basis compared with the $118 million or 43 bps witnessed in the prior-year quarter.

Further, the total allowance for credit losses decreased 21% to $2.07 billion from the prior-year quarter. Total non-performing assets were $527 million, down 39% from the year-ago quarter.

Capital Position Declines 

 Tier 1 risk-based capital ratio was 10.89% compared with the 11.83% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.53%, down from 10.34% recorded at the end of the year-ago quarter. The Tier 1 leverage ratio was 8.27% compared with the year-earlier quarter’s 8.49%.

Our Viewpoint

We believe that Fifth Third, with a diversified traditional banking platform, is well-poised to benefit from the recovery in the economies where it has a footprint. The bank’s steady improvement in loans and deposits highlights its efficient organic growth strategy.

The company recently announced the acquisition of Dividend Finance, a point-of-sale consumer lender. The buyout, expected to close in second-quarter 2022, enhances its expanded digital service capabilities.

Though FITB’s focus on several strategic initiatives to boost performance is a positive; several issues, including margin contraction and low rates, prevail.

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 Banks

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 handily outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compared favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality acted as a tailwind. Growth in loan and deposit balance, and a strong capital position were encouraging factors. Moreover, U.S. Bancorp has closed the acquisition of San Francisco-based fintech firm, TravelBank, which offers technology-driven cost and travel management solutions.


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