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Factors Setting the Stage for Fifth Third's (FITB) Q2 Earnings
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report second-quarter 2022 results on Jul 21, before the opening bell. FITB’s second-quarter revenues are expected to have risen, while earnings are anticipated to have declined from the year-ago reported figure.
Before we analyze the factors that are likely to have impacted second-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. The company’s performance displayed a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in three of the trailing four quarters and missed in the other, the average beat being 4.33%.
The Zacks Consensus Estimate for FITB’s second-quarter earnings of 87 cents has been revised marginally downward in the past seven days. Also, the figure indicates a 7.5% decline from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.05 billion, suggesting growth of 5.2% from the year-ago reported figure.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
Net Interest Income (NII): In the second quarter, lending activity witnessed a decent sequential acceleration. Per the Fed’s latest data, there was considerable strength in commercial lending in the second quarter, backed by commercial and industrial loans, and commercial real estate loans. Residential real estate loans and consumer loans also improved. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the second quarter.
Management expects average commercial loans and leases to be up 4% and average consumer loans to be stable on a sequential basis.
With this, the company expects total average loans and leases (including held-for-sale loans) to sequentially rise 2.5%.
In the second quarter, the Fed hiked interest rates by 50 basis points (bps) in May and another 75 bps in June. With this, the level of the policy rate reached 1.5-1.75%. Hence, with the broader market environment remaining conducive for continued loan growth, $13 billion of securities added in the first quarter and interest rate hikes, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
Hence, backed by prudent deployment of excess liquidity, NII is expected to have improved in the quarter under review. The company expects NII to be up 11-12% sequentially. Nonetheless, the consensus mark of $1.33 billion for NII indicates a 12% increase.
Non-Interest Revenues: Since the beginning of the year, there have been heightened speculations that the Fed would aggressively raise rates as it has happened. This resulted in a substantial rise in mortgage rates in the second quarter, with home loan interest rates hitting a 14-year-high in June.
Thus, mortgage origination and refinancing activities decreased drastically. This, along with lower gains on sale margins, is expected to have affected the company’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $48.09 million, suggesting a 7.5% drop from the prior quarter’s reported number.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
The consensus estimate of $152 million for service charges on deposits suggests flat results with the previous quarter’s actuals.
Lastly, the past acquisition of Dividend Finance, as well as the purchase of Provide in 2021, have aided expansion of commercial verticals.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $732 million, suggesting a 7% rise sequentially. Fifth Third expects non-interest income to be up 3% sequentially.
Expenses: The company’s investments in areas like technology and inflation-led rise in wages are anticipated to have escalated expenses. Nonetheless, branch consolidations have enabled Fifth Third to reduce expenses. Such a reduction in costs is likely to have alleviated pressure from the bottom line.
On a sequential basis, management expects second-quarter expenses to be down 6-7%.
Key Developments During the Quarter
In May, Fifth Third announced the completion of its acquisition of Dividend Finance, which is a leading fintech point-of-sale lender, providing financing solutions for residential renewable energy and sustainability-focused home improvement.The acquisition, announced in January, is accretive to Fifth Third as it enhances the company’s digital service capabilities by providing its customers with solar and sustainable home improvement options.
Let’s have a look at what our quantitative model predicts:
Our proven model does not conclusively predict an earnings beat for FITB this time around. This is because Fifth Third does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
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 Fifth Third is -0.14%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Bank Stocks Worth a Look
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:
The Earnings ESP for Regions Financial (RF - Free Report) is +0.89% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 22.
Over the past week, the Zacks Consensus Estimate for RF’s quarterly earnings has been revised marginally downward.
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Factors Setting the Stage for Fifth Third's (FITB) Q2 Earnings
Fifth Third Bancorp (FITB - Free Report) is scheduled to report second-quarter 2022 results on Jul 21, before the opening bell. FITB’s second-quarter revenues are expected to have risen, while earnings are anticipated to have declined from the year-ago reported figure.
Before we analyze the factors that are likely to have impacted second-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. The company’s performance displayed a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in three of the trailing four quarters and missed in the other, the average beat being 4.33%.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
The Zacks Consensus Estimate for FITB’s second-quarter earnings of 87 cents has been revised marginally downward in the past seven days. Also, the figure indicates a 7.5% decline from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.05 billion, suggesting growth of 5.2% from the year-ago reported figure.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
Net Interest Income (NII): In the second quarter, lending activity witnessed a decent sequential acceleration. Per the Fed’s latest data, there was considerable strength in commercial lending in the second quarter, backed by commercial and industrial loans, and commercial real estate loans. Residential real estate loans and consumer loans also improved. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the second quarter.
Management expects average commercial loans and leases to be up 4% and average consumer loans to be stable on a sequential basis.
With this, the company expects total average loans and leases (including held-for-sale loans) to sequentially rise 2.5%.
In the second quarter, the Fed hiked interest rates by 50 basis points (bps) in May and another 75 bps in June. With this, the level of the policy rate reached 1.5-1.75%. Hence, with the broader market environment remaining conducive for continued loan growth, $13 billion of securities added in the first quarter and interest rate hikes, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
Hence, backed by prudent deployment of excess liquidity, NII is expected to have improved in the quarter under review. The company expects NII to be up 11-12% sequentially. Nonetheless, the consensus mark of $1.33 billion for NII indicates a 12% increase.
Non-Interest Revenues: Since the beginning of the year, there have been heightened speculations that the Fed would aggressively raise rates as it has happened. This resulted in a substantial rise in mortgage rates in the second quarter, with home loan interest rates hitting a 14-year-high in June.
Thus, mortgage origination and refinancing activities decreased drastically. This, along with lower gains on sale margins, is expected to have affected the company’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $48.09 million, suggesting a 7.5% drop from the prior quarter’s reported number.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
The consensus estimate of $152 million for service charges on deposits suggests flat results with the previous quarter’s actuals.
Lastly, the past acquisition of Dividend Finance, as well as the purchase of Provide in 2021, have aided expansion of commercial verticals.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $732 million, suggesting a 7% rise sequentially. Fifth Third expects non-interest income to be up 3% sequentially.
Expenses: The company’s investments in areas like technology and inflation-led rise in wages are anticipated to have escalated expenses. Nonetheless, branch consolidations have enabled Fifth Third to reduce expenses. Such a reduction in costs is likely to have alleviated pressure from the bottom line.
On a sequential basis, management expects second-quarter expenses to be down 6-7%.
Key Developments During the Quarter
In May, Fifth Third announced the completion of its acquisition of Dividend Finance, which is a leading fintech point-of-sale lender, providing financing solutions for residential renewable energy and sustainability-focused home improvement.The acquisition, announced in January, is accretive to Fifth Third as it enhances the company’s digital service capabilities by providing its customers with solar and sustainable home improvement options.
Let’s have a look at what our quantitative model predicts:
Our proven model does not conclusively predict an earnings beat for FITB this time around. This is because Fifth Third does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
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 Fifth Third is -0.14%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Bank Stocks Worth a Look
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:
The Earnings ESP for Regions Financial (RF - Free Report) is +0.89% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 22.
Over the past week, the Zacks Consensus Estimate for RF’s quarterly earnings has been revised marginally downward.
Bank OZK (OZK - Free Report) is scheduled to release second-quarter 2022 earnings on Jul 21. OZK, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +2.69%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.