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Fee Income Woes to Hurt Truist Financial (TFC) Q1 Earnings
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Truist Financial (TFC - Free Report) is slated to announce first-quarter 2022 results on Apr 19, before market open. Per the Fed’s latest data, commercial and industrial loan balances (accounting for roughly 50% of the company’s total loans and leases held for investment) have witnessed a decent uptick, with an improvement in overall lending activities.
The Zacks Consensus Estimate for average earning assets for the to-be-reported quarter is pegged at $475.5 billion, indicating an almost 1% rise from the prior quarter’s reported figure.
Though the Federal Reserve increased the interest rates by 25 basis points (bps) in mid-March, there is likely to be very less impact of the same on the company’s net interest margin (NIM) and net interest income (NII) in the quarter. Nonetheless, the rise in loan demand is expected to have offered some support.
Management expects reported NIM to be down 2 bps due to lower purchase accounting accretion, while the core NIM will likely be flat. The consensus estimate for NII of $3.2 billion implies a 1.5% decline on a sequential basis.
Other Factors to Watch for
Non-interest Income: Unlike the last several quarters, deposit balance is not expected to grow much during the first quarter. This is likely to have had an adverse impact on revenues from service charges on deposits. The Zacks Consensus Estimate of $264 million for the same implies a 3.3% decline on a sequential basis.
Rising inflation and uncertainty over economic growth going forward, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. Thus, this likely had a negative impact on Truist Financial’s card business. The Zacks Consensus Estimate for card and payment-related fees of $220 million suggests a 1.8% fall sequentially.
Further, the consensus estimate of investment banking and brokerage fees and commissions of $310 million indicates a 17.7% decrease from the prior quarter given the disappointing equity market performance and a slowdown in M&As.
Also, rising mortgage rates and inflation weighed on mortgage originations and refinancing activities during the quarter, thus hurting TFC’s mortgage banking income. Thus, the consensus estimate for the same of $122 million suggests a 23.3% plunge sequentially.
The consensus mark for income from bank-owned life insurance is $43.8 million, suggesting a marginal fall from the previous quarter’s reported number.
With an increased focus on its insurance business, Truist Financial acquired Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners. The consensus estimate for insurance commissions of $706 million reflects a 6% sequential improvement.
A rise in loan demand is expected to have offered support to the company’s lending-related fees. The Zacks Consensus Estimate for the same of $81 million remains unchanged.
The Zacks Consensus Estimate for total non-interest income of $2.31 billion implies an almost 1% decrease on a sequential basis.
Expenses: Truist Financial has been witnessing a continued rise in overall expenses over the past several quarters because of investments in technology upgrades and merger integration. A similar trend is expected to have continued in the first quarter as well.
Yet, the company’s cost-saving efforts and plans to close roughly 800 branches by the end of the first quarter are likely to have resulted in lower expenses.
Management anticipates adjusted non-interest expenses (excluding merger costs and amortization) for the quarter to rise 1-2% sequentially, mainly due to seasonality and personnel expenses and higher marketing expenses.
Asset Quality: In the last three quarters, Truist Financial had been releasing reserves that it built to cover losses from the effects of the coronavirus pandemic. This hugely supported the company’s earnings. However, with the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company might have built reserves in the first quarter.
The Zacks Consensus Estimate for non-performing assets is pegged at $1.18 billion, indicating a rise of 1.6% from the last reported quarter. The consensus estimate for total non-accrual loans and leases of $1.07 billion suggests a 3.9% decrease.
Earnings Whispers
According to our quantitative model, the chances of Truist Financial beating the Zacks Consensus Estimate this time 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.
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 Truist Financial is -2.69%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Truist Financial Corporation Price and EPS Surprise
The Zacks Consensus Estimate for first-quarter earnings of $1.12 per share has moved almost 1% lower over the past 30 days. The figure indicates a fall of 5.1% from the year-ago reported number.
The consensus estimate for sales is pegged at $5.52 billion, indicating a marginal rise of 0.6%. Management projects total revenues to decline 1-2% sequentially.
Banks Worth Considering
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Commerce Bancshares (CBSH - Free Report) is slated to announce first-quarter 2022 results on Apr 19. The company currently carries a Zacks Rank #2 (Buy) and has an Earnings ESP of +2.33%.
CBSH’s earnings estimates for the to-be-reported quarter have moved 3.5% north over the 30 days.
Image: Shutterstock
Fee Income Woes to Hurt Truist Financial (TFC) Q1 Earnings
Truist Financial (TFC - Free Report) is slated to announce first-quarter 2022 results on Apr 19, before market open. Per the Fed’s latest data, commercial and industrial loan balances (accounting for roughly 50% of the company’s total loans and leases held for investment) have witnessed a decent uptick, with an improvement in overall lending activities.
The Zacks Consensus Estimate for average earning assets for the to-be-reported quarter is pegged at $475.5 billion, indicating an almost 1% rise from the prior quarter’s reported figure.
Though the Federal Reserve increased the interest rates by 25 basis points (bps) in mid-March, there is likely to be very less impact of the same on the company’s net interest margin (NIM) and net interest income (NII) in the quarter. Nonetheless, the rise in loan demand is expected to have offered some support.
Management expects reported NIM to be down 2 bps due to lower purchase accounting accretion, while the core NIM will likely be flat. The consensus estimate for NII of $3.2 billion implies a 1.5% decline on a sequential basis.
Other Factors to Watch for
Non-interest Income: Unlike the last several quarters, deposit balance is not expected to grow much during the first quarter. This is likely to have had an adverse impact on revenues from service charges on deposits. The Zacks Consensus Estimate of $264 million for the same implies a 3.3% decline on a sequential basis.
Rising inflation and uncertainty over economic growth going forward, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. Thus, this likely had a negative impact on Truist Financial’s card business. The Zacks Consensus Estimate for card and payment-related fees of $220 million suggests a 1.8% fall sequentially.
Further, the consensus estimate of investment banking and brokerage fees and commissions of $310 million indicates a 17.7% decrease from the prior quarter given the disappointing equity market performance and a slowdown in M&As.
Also, rising mortgage rates and inflation weighed on mortgage originations and refinancing activities during the quarter, thus hurting TFC’s mortgage banking income. Thus, the consensus estimate for the same of $122 million suggests a 23.3% plunge sequentially.
The consensus mark for income from bank-owned life insurance is $43.8 million, suggesting a marginal fall from the previous quarter’s reported number.
With an increased focus on its insurance business, Truist Financial acquired Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners. The consensus estimate for insurance commissions of $706 million reflects a 6% sequential improvement.
A rise in loan demand is expected to have offered support to the company’s lending-related fees. The Zacks Consensus Estimate for the same of $81 million remains unchanged.
The Zacks Consensus Estimate for total non-interest income of $2.31 billion implies an almost 1% decrease on a sequential basis.
Expenses: Truist Financial has been witnessing a continued rise in overall expenses over the past several quarters because of investments in technology upgrades and merger integration. A similar trend is expected to have continued in the first quarter as well.
Yet, the company’s cost-saving efforts and plans to close roughly 800 branches by the end of the first quarter are likely to have resulted in lower expenses.
Management anticipates adjusted non-interest expenses (excluding merger costs and amortization) for the quarter to rise 1-2% sequentially, mainly due to seasonality and personnel expenses and higher marketing expenses.
Asset Quality: In the last three quarters, Truist Financial had been releasing reserves that it built to cover losses from the effects of the coronavirus pandemic. This hugely supported the company’s earnings. However, with the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company might have built reserves in the first quarter.
The Zacks Consensus Estimate for non-performing assets is pegged at $1.18 billion, indicating a rise of 1.6% from the last reported quarter. The consensus estimate for total non-accrual loans and leases of $1.07 billion suggests a 3.9% decrease.
Earnings Whispers
According to our quantitative model, the chances of Truist Financial beating the Zacks Consensus Estimate this time 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.
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 Truist Financial is -2.69%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Truist Financial Corporation Price and EPS Surprise
Truist Financial Corporation price-eps-surprise | Truist Financial Corporation Quote
The Zacks Consensus Estimate for first-quarter earnings of $1.12 per share has moved almost 1% lower over the past 30 days. The figure indicates a fall of 5.1% from the year-ago reported number.
The consensus estimate for sales is pegged at $5.52 billion, indicating a marginal rise of 0.6%. Management projects total revenues to decline 1-2% sequentially.
Banks Worth Considering
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Commerce Bancshares (CBSH - Free Report) is slated to announce first-quarter 2022 results on Apr 19. The company currently carries a Zacks Rank #2 (Buy) and has an Earnings ESP of +2.33%.
CBSH’s earnings estimates for the to-be-reported quarter have moved 3.5% north over the 30 days.
Associated Banc-Corp (ASB - Free Report) is scheduled to release first-quarter 2022 numbers on Apr 21. The company, which sports a Zacks Rank #1 (Strong Buy) at present, has an Earnings ESP of +0.81%. You can see the complete list of today’s Zacks #1 Rank stocks here.
ASB’s quarterly earnings estimates have remained unchanged over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.