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Fifth Third (FITB) Q1 Earnings & Revenues Miss Estimates

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Fifth Third Bancorp (FITB - Free Report) has reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

The company’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports.

The company reported net income available to common shareholders of $474 million compared with the $674 million witnessed in the prior-year quarter.

Revenues Fall on Low Fee Income, Loans & Deposits Rise

Total revenues (on a fully taxable-equivalent or FTE basis) for the reported quarter were $1.88 billion, down 2% year over year due to lower fee income. Also, the revenue figure missed the Zacks Consensus Estimate of $1.93 billion.

Fifth Third’s net interest income (NII) (on a FTE basis) was $1.19 billion, up 2% year over year. It primarily reflects the benefits of higher indirect secured consumer loan balances, higher investment portfolio balances, and a reduction in long-term debt. This was partially offset by lower Paycheck Protection Program (PPP)-related income and a decline in home equity balances.

Net interest margin (on a FTE basis) shrunk 3 basis points (bps) year over year to 2.59%.

Non-interest income fell 9% year over year to $684 million. This was primarily due to a decline in commercial banking revenues, mortgage banking net revenues and leasing business revenues.

Non-interest expenses increased 1% from the prior-year quarter to $1.22 billion. Higher compensation and benefits, technology and communications, and equipment expenses chiefly resulted in the rise.

As of Mar 31, 2022, average loan and lease balances, and average total deposits were at $113.47 billion and $168.66 billion, respectively. Loans increased 4%, whereas deposits improved 1% on a sequential basis.

Credit Quality Improves

The company reported a provision for credit losses of $45 million against the benefits of $173 million seen in the year-ago quarter. Net charge-offs for the first quarter were $34 million or 12 bps of average loans and leases on an annualized basis compared with the $71 million or 27 bps witnessed in the prior-year quarter.

Further, the total allowance for credit losses decreased 12.43% to $2.08 billion from the prior-year quarter. Total non-performing assets were $540 million, down 31% from the year-ago quarter.

Capital Position Declines

Tier 1 risk-based capital ratio was 10.60% compared with the 11.94% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.28%, down from 10.46% recorded at the end of the year-ago quarter. The Tier 1 leverage ratio was 8.32% compared with the year-earlier quarter’s 8.61%.

Our Viewpoint

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

Though FITB’s focus on several strategic initiatives to boost performance is a positive, several issues — including margin contraction and expense growth — 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

The PNC Financial Services Group, Inc. (PNC - Free Report) pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom line decreased 20% year over year.

Higher NII, driven by interest-earning assets and loan growth, was a tailwind for PNC Financial. However, higher expenses and a decline in deposits dragged the results.

U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

First Republic Bank’s (FRC - Free Report) first-quarter 2022 earnings per share of $2 have surpassed the Zacks Consensus Estimate of $1.90. Additionally, the bottom line improved 11.7% from the year-ago quarter.

FRC’s results were supported by an increase in NII and non-interest income. The company’s capital position was strong in the quarter. Higher expenses and elevated provision for credit losses were the offsetting factors.