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NII, Loans to Aid Truist (TFC) Q3 Earnings Amid Soft Fee Income
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Truist Financial (TFC - Free Report) is scheduled to announce third-quarter 2022 results on Oct 18, 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 robust uptick, with an improvement in the overall lending scenario.
The Zacks Consensus Estimate for average earning assets for the to-be-reported quarter is pegged at $479.8 billion, indicating a 3.9% rise from the prior-year quarter’s reported figure. Our estimate for the metric stands at $489.2 billion, marking a 5.9% growth.
With the Federal Reserve increasing the interest rates by 150 basis points (bps) during the third quarter, the company’s net interest margin (NIM) and net interest income (NII) are expected to have been positively impacted. Also, the rise in loan demand is expected to have offered support. Our estimate for total loans is $335.7 billion, indicating a 15.5% jump.
Management projects a mid-20 bps sequential increase in its core NIM due to the benefits of recent rate hikes. It also expects a low-20 bps increase in GAAP NIM as a result of core NIM expansion, offset by continued declines in purchase accounting accretion.
The consensus estimate for NII of $3.71 billion implies a 14.8% rise on a year-over-year basis. We project NII to grow 13.9% to $3.68 billion.
Other Factors to Watch
Non-Interest Income: Unlike the pandemic days, the deposit balance is not expected to have grown much during the third quarter. This is likely to have had an adverse impact on revenues from service charges on deposits. The Zacks Consensus Estimate of $245 million for the same implies an 11.2% fall from the prior year period. Our estimate for the metric is $245.2 million.
Rising mortgage rates (crossing the 6% mark in September) and inflation weighed on mortgage originations and refinancing activities during the quarter, hurting TFC’s mortgage banking income. Thus, the consensus estimate for the same of $89 million suggests a 50.3% plunge. Our estimate for the metric is pegged at $123.3 million, reflecting a decline of 31.1%.
Further, the consensus estimate of investment banking and brokerage fees and commissions of $250 million indicates a 16.9% decrease from the prior-year quarter, given the volatility in the equity markets and a slowdown in M&As. We project the same to tank 26.6% to $231.8 million.
With an increased focus on its insurance business, Truist Financial acquired Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners. Also, during the third quarter, it announced plans to buy BenefitMall and BankDirect Capital Finance. The consensus estimate for insurance commissions of $766 million reflects an 18.8% year-over-year improvement. Our estimate for the metric is pegged at $770.1 million, reflecting a rise of 19.4%.
The consensus estimate for income from bank-owned life insurance is $52 million, suggesting a 21% rise from the previous-year quarter’s reported number. We project the same to grow 35.3% to $58.2 million.
Further, 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 $95 million indicates a 28.4% jump. We anticipate the metric to increase 29.8% to $96 million.
While rising inflation hurt consumer sentiments, decent economic growth and pent-up demand are expected to have driven consumers toward using cards. Thus, this likely had a positive impact on TFC’s card business. The Zacks Consensus Estimate for the card and payment-related fees of $253 million suggests 12.4% growth. We expect the same to rise 15.3% to $259.3 million.
The Zacks Consensus Estimate for total non-interest income of $2.21 billion implies a 6.4% decrease on a year-over-year basis. Our estimate for the same stands at $2.26 billion, reflecting a fall of 4.6%.
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 third quarter as well.
Our estimate for total adjusted non-interest expenses is pegged at $3.72 billion, reflecting an 8.1% increase from the prior-year quarter number.
Asset Quality: Given the increase in loan balance and expectations of a deteriorating macroeconomic outlook, Truist Financial might have built reserves in the third quarter. Our estimate for provision for credit losses is pegged at $142.5 million against a provision benefit of $324 million a year ago.
The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $1.29 billion, indicating a rise of 7.1% from the last year’s reported quarter. The consensus estimate for total non-accrual loans and leases of $1.22 billion suggests a 5.8% increase.
Our estimates for NPAs and non-accrual loans and leases are $1.3 billion and $1.22 billion, respectively.
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 -1.81%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Truist Financial Corporation Price and EPS Surprise
The Zacks Consensus Estimate for third-quarter earnings of $1.27 per share has moved almost 1% lower over the past seven days. The figure indicates a fall of 10.6% from the year-ago reported number. Our estimate for earnings is $1.30, indicating an 8.6% fall.
The consensus estimate for sales is pegged at $5.93 billion, indicating a rise of 5.9%. Management expects adjusted pre-provision net revenues to increase in the high-single-digit sequentially. Our estimate for sales is $5.94 billion, reflecting an increase of 6%.
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:
The Earnings ESP for Morgan Stanley (MS - Free Report) is +0.59% and it carries a Zacks Rank #3, at present. The company is slated to report third-quarter 2022 results on Oct 14.
Over the past 30 days, MS’ Zacks Consensus Estimate for quarterly earnings has moved 3.2% lower.
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NII, Loans to Aid Truist (TFC) Q3 Earnings Amid Soft Fee Income
Truist Financial (TFC - Free Report) is scheduled to announce third-quarter 2022 results on Oct 18, 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 robust uptick, with an improvement in the overall lending scenario.
The Zacks Consensus Estimate for average earning assets for the to-be-reported quarter is pegged at $479.8 billion, indicating a 3.9% rise from the prior-year quarter’s reported figure. Our estimate for the metric stands at $489.2 billion, marking a 5.9% growth.
With the Federal Reserve increasing the interest rates by 150 basis points (bps) during the third quarter, the company’s net interest margin (NIM) and net interest income (NII) are expected to have been positively impacted. Also, the rise in loan demand is expected to have offered support. Our estimate for total loans is $335.7 billion, indicating a 15.5% jump.
Management projects a mid-20 bps sequential increase in its core NIM due to the benefits of recent rate hikes. It also expects a low-20 bps increase in GAAP NIM as a result of core NIM expansion, offset by continued declines in purchase accounting accretion.
The consensus estimate for NII of $3.71 billion implies a 14.8% rise on a year-over-year basis. We project NII to grow 13.9% to $3.68 billion.
Other Factors to Watch
Non-Interest Income: Unlike the pandemic days, the deposit balance is not expected to have grown much during the third quarter. This is likely to have had an adverse impact on revenues from service charges on deposits. The Zacks Consensus Estimate of $245 million for the same implies an 11.2% fall from the prior year period. Our estimate for the metric is $245.2 million.
Rising mortgage rates (crossing the 6% mark in September) and inflation weighed on mortgage originations and refinancing activities during the quarter, hurting TFC’s mortgage banking income. Thus, the consensus estimate for the same of $89 million suggests a 50.3% plunge. Our estimate for the metric is pegged at $123.3 million, reflecting a decline of 31.1%.
Further, the consensus estimate of investment banking and brokerage fees and commissions of $250 million indicates a 16.9% decrease from the prior-year quarter, given the volatility in the equity markets and a slowdown in M&As. We project the same to tank 26.6% to $231.8 million.
With an increased focus on its insurance business, Truist Financial acquired Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners. Also, during the third quarter, it announced plans to buy BenefitMall and BankDirect Capital Finance. The consensus estimate for insurance commissions of $766 million reflects an 18.8% year-over-year improvement. Our estimate for the metric is pegged at $770.1 million, reflecting a rise of 19.4%.
The consensus estimate for income from bank-owned life insurance is $52 million, suggesting a 21% rise from the previous-year quarter’s reported number. We project the same to grow 35.3% to $58.2 million.
Further, 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 $95 million indicates a 28.4% jump. We anticipate the metric to increase 29.8% to $96 million.
While rising inflation hurt consumer sentiments, decent economic growth and pent-up demand are expected to have driven consumers toward using cards. Thus, this likely had a positive impact on TFC’s card business. The Zacks Consensus Estimate for the card and payment-related fees of $253 million suggests 12.4% growth. We expect the same to rise 15.3% to $259.3 million.
The Zacks Consensus Estimate for total non-interest income of $2.21 billion implies a 6.4% decrease on a year-over-year basis. Our estimate for the same stands at $2.26 billion, reflecting a fall of 4.6%.
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 third quarter as well.
Our estimate for total adjusted non-interest expenses is pegged at $3.72 billion, reflecting an 8.1% increase from the prior-year quarter number.
Asset Quality: Given the increase in loan balance and expectations of a deteriorating macroeconomic outlook, Truist Financial might have built reserves in the third quarter. Our estimate for provision for credit losses is pegged at $142.5 million against a provision benefit of $324 million a year ago.
The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $1.29 billion, indicating a rise of 7.1% from the last year’s reported quarter. The consensus estimate for total non-accrual loans and leases of $1.22 billion suggests a 5.8% increase.
Our estimates for NPAs and non-accrual loans and leases are $1.3 billion and $1.22 billion, respectively.
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 -1.81%.
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 third-quarter earnings of $1.27 per share has moved almost 1% lower over the past seven days. The figure indicates a fall of 10.6% from the year-ago reported number. Our estimate for earnings is $1.30, indicating an 8.6% fall.
The consensus estimate for sales is pegged at $5.93 billion, indicating a rise of 5.9%. Management expects adjusted pre-provision net revenues to increase in the high-single-digit sequentially. Our estimate for sales is $5.94 billion, reflecting an increase of 6%.
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:
The Earnings ESP for Morgan Stanley (MS - Free Report) is +0.59% and it carries a Zacks Rank #3, at present. The company is slated to report third-quarter 2022 results on Oct 14.
Over the past 30 days, MS’ Zacks Consensus Estimate for quarterly earnings has moved 3.2% lower.
Associated Banc-Corp (ASB - Free Report) is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +2.39%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ASB’s quarterly earnings estimates have moved 1.7% upward over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.