Citizens Financial Group (CFG Quick QuoteCFG - Free Report) is scheduled to report second-quarter 2022 earnings results on Jul 19, before market open. Its quarterly earnings are expected to have declined year over year, while revenues are likely to have improved.

In the prior quarter, this Providence, RI-based bank surpassed the Zacks Consensus Estimate on net interest income (NII) growth on the rise in loan balances. Further, strong credit quality, backed by an improving economy, was a tailwind. However, a rise in expenses and declining fee income were spoilsports.

Citizens Financial has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the surprise being 13.3%, on average.

Factors at Play

Loans:  The ongoing economic expansion is expected to have supported the lending environment in the quarter. Amid this, the demand for loans is anticipated to have improved. Per the Fed’s latest data, commercial real estate loans, consumer loans, credit card loans and commercial and industrial loans have driven overall loan demand in April and May.

Hence, the company’s loan balances are likely to have improved in the second quarter. Management expects average loans to grow 18-20% on a sequential basis.

NII: In addition to loan growth, there was a rise in interest rates in the quarter. The Federal Reserve raised rates by 125 basis points in total in the quarter. The policy rate reached 1.5-1.75%, the highest level since just before the March 2020 pandemic. Thus, loan growth, coupled with higher rates, is expected to have positively impacted the company’s NII.

Management expects average loans to grow 18-20% on a sequential basis. Average interest-earning assets are expected to grow 15-17% on a sequential basis. NII is anticipated to be up 27-29% on a sequential basis.

The Zacks Consensus Estimate of $1.48 billion for NII indicates a 28.8% increase from the prior quarter.

Fee Income: The geopolitical tensions related to the Russian-Ukraine war continued to dampen the equity market performance. This is likely to have decreased the company’s fee income. Trust and investment services fees are likely to have been negatively impacted by a decrease in assets under management from outflows and lower equity market levels. The consensus mark for the same is pegged at $62 million, indicating a 1.6% rise from the prior quarter’s reported figure.

Mortgage rates significantly increased sequentially in the to-be-reported quarter. Also, mortgage origination activities are estimated to have decreased dramatically, with the rising rates dismaying refinancing activity. These factors are expected to have abated Citizens Financial’s mortgage banking fees in the to-be-reported quarter. The consensus estimate for the same, pegged at $67 million, suggests a 2.9% fall sequentially.

Deposits for Citizens Financial are likely to have increased, given its acquisition of Investors Bancorp in the second quarter. However, the positive impacts of these are likely to have been offset by the company’s eased overdraft fee policy, resulting in lower revenues from service charges and fees.

The macro-environment for deal-making considerably reduced in second-quarter 2022. Hence, with a decrease in global merger and acquisition volumes, the company’s capital market fees are likely to have been negatively impacted on a sequential basis.

The consensus estimate for non-interest income is pegged at $525 million, suggesting a 5.4% sequential increase. Per management, non-interest income is anticipated to grow 7-9% on a sequential basis.

Expenses: Despite its TOP 7 efficiency initiatives, Citizens Financial’s expenses are expected to have flared up on investments in newer technologies and building fee income capabilities organically. Management expects non-interest expenses to grow 12-13% on a sequential basis.

Key Developments During the Quarter

In April, Citizens Financial completed the acquisition of Investors Bancorp. In July 2021, the company announced that it would acquire Investors for a $3.39-billion cash-and-stock deal. The company issued 72.2 million shares and paid $355 million in cash.

Earnings Whispers

Our proven shows that an earnings beat is likely for CFG this time around. This is because Citizens Financial has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat this time around.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Citizens Financial is +5.06%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.03, suggesting a 29.5% decline from the year-ago reported number.  The Zacks Consensus Estimate for CFG’s second-quarter earnings has moved marginally upward over the past month, reflecting bullish sentiments of analysts. Also, the consensus mark of $2 billion for second-quarter revenues indicates a 24.5% year-over-year rise.

Other Bank Stocks to Consider

Here are a couple of other bank stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

M&T Bank (MTB Quick QuoteMTB - Free Report) is scheduled to release second-quarter 2022 earnings on Jul 20. The company, which carries a Zacks Rank #2 (Hold) at present, has an Earnings ESP of +1.82%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MTB’s quarterly earnings estimates have been unchanged over the past month.
The Earnings ESP for Truist Financial (TFC Quick QuoteTFC - Free Report) is +1.38% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 19.

Over the past 30 days, TFC’s Zacks Consensus Estimate for quarterly earnings has been unchanged.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.