We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Key Factors to Note for Fifth Third's (FITB) Q3 Earnings
Read MoreHide Full Article
Fifth Third Bancorp (FITB - Free Report) is scheduled to report third-quarter 2022 results on Jul 20, before the opening bell. FITB’s third-quarter revenues and earnings are expected to have risen from the year-ago reported figure.
Before we analyze the factors that are likely to have impacted third-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings missed the Zacks Consensus Estimate. The company’s performance was supported by high net interest income (NII), lower expenses, improved average loans and lease balances, and a decline in non-performing assets. However, a significant fall in fee income was an undermining factor.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in two of the trailing four quarters and missed in the other two, the average beat being 1.28%.
The Zacks Consensus Estimate for FITB’s third-quarter earnings of 98 cents has been revised marginally downward in the past month. Nonetheless, the figure indicates a 4.3% rise from the year-ago reported number. Our estimate for the same is $1.
The consensus estimate for revenues is pegged at $2.19 billion, suggesting growth of 8.2% from the year-ago reported figure.Our estimate for the same is $2.14 billion. The company expects revenues to sequentially rise 8-9%.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
NII: While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the third quarter. The company expects total average loans and leases (including held-for-sale loans) to sequentially rise 1%.
In the third quarter, the Fed hiked interest rates by 150 basis points (bps). With this, the level of the policy rate reached 3-3.25%. Hence, with higher market rates, growth in investment portfolio balances and an expected rise in commercial & industrial loan balances, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
The company expects NII (on an FTE basis) to be up 11-12% sequentially. The consensus mark of $1.49 billion for NII (on an FTE basis) indicates an 11.3% increase. Our estimate for the metric is the same.
Non-Interest Revenues: Global deal-making shrank for the third consecutive quarter. Raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments and plans for expansion via acquisitions. Thus, deal volume and total value numbers crashed in the third quarter. With a decrease in mergers and acquisition (M&A) volumes, M&A advisory revenues are expected to have slumped, hindering commercial banking revenues.
The consensus estimate of $146 million for service charges on deposits suggests a 5.2% decline from the previous quarter’s actuals. This is expected to have been driven by a likely decline in deposits in the quarter.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
Mortgage originations, both purchase and refinancing, continued to decline in the third quarter. This was mainly due to a rise in mortgage rates, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has taken a toll on the origination market. This is anticipated to have reduced the company’s origination fees.
Nonetheless, higher rates have reduced prepayment speed and MSR asset decay. This, along with an increase in mortgage servicing revenues, is expected to have driven FITB’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $41.3 million, suggesting a 33% rise from the prior quarter’s reported number.
Lastly, third-quarter fee income is expected to have benefitted from a full-quarter effect of the acquisition of Dividend Finance that was closed in May 2022.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $689 million, suggesting a 2% rise sequentially. Fifth Third expects adjusted non-interest income to be down 3-4% sequentially.
Expenses: Owing to strategic investments in technology and marketing, and increased minimum wages, the company’s expenses are anticipated to have escalated and impeded the bottom line. On a sequential basis, management expects third-quarter expenses to be up 4-5%. We project a 4.2% sequential rise in the metric.
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 -1.25%.
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp 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 +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Image: Bigstock
Key Factors to Note for Fifth Third's (FITB) Q3 Earnings
Fifth Third Bancorp (FITB - Free Report) is scheduled to report third-quarter 2022 results on Jul 20, before the opening bell. FITB’s third-quarter revenues and earnings are expected to have risen from the year-ago reported figure.
Before we analyze the factors that are likely to have impacted third-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings missed the Zacks Consensus Estimate. The company’s performance was supported by high net interest income (NII), lower expenses, improved average loans and lease balances, and a decline in non-performing assets. However, a significant fall in fee income was an undermining factor.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in two of the trailing four quarters and missed in the other two, the average beat being 1.28%.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
The Zacks Consensus Estimate for FITB’s third-quarter earnings of 98 cents has been revised marginally downward in the past month. Nonetheless, the figure indicates a 4.3% rise from the year-ago reported number. Our estimate for the same is $1.
The consensus estimate for revenues is pegged at $2.19 billion, suggesting growth of 8.2% from the year-ago reported figure.Our estimate for the same is $2.14 billion. The company expects revenues to sequentially rise 8-9%.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
NII: While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the third quarter. The company expects total average loans and leases (including held-for-sale loans) to sequentially rise 1%.
In the third quarter, the Fed hiked interest rates by 150 basis points (bps). With this, the level of the policy rate reached 3-3.25%. Hence, with higher market rates, growth in investment portfolio balances and an expected rise in commercial & industrial loan balances, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
The company expects NII (on an FTE basis) to be up 11-12% sequentially. The consensus mark of $1.49 billion for NII (on an FTE basis) indicates an 11.3% increase. Our estimate for the metric is the same.
Non-Interest Revenues: Global deal-making shrank for the third consecutive quarter. Raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments and plans for expansion via acquisitions. Thus, deal volume and total value numbers crashed in the third quarter. With a decrease in mergers and acquisition (M&A) volumes, M&A advisory revenues are expected to have slumped, hindering commercial banking revenues.
The consensus estimate of $146 million for service charges on deposits suggests a 5.2% decline from the previous quarter’s actuals. This is expected to have been driven by a likely decline in deposits in the quarter.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
Mortgage originations, both purchase and refinancing, continued to decline in the third quarter. This was mainly due to a rise in mortgage rates, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has taken a toll on the origination market. This is anticipated to have reduced the company’s origination fees.
Nonetheless, higher rates have reduced prepayment speed and MSR asset decay. This, along with an increase in mortgage servicing revenues, is expected to have driven FITB’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $41.3 million, suggesting a 33% rise from the prior quarter’s reported number.
Lastly, third-quarter fee income is expected to have benefitted from a full-quarter effect of the acquisition of Dividend Finance that was closed in May 2022.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $689 million, suggesting a 2% rise sequentially. Fifth Third expects adjusted non-interest income to be down 3-4% sequentially.
Expenses: Owing to strategic investments in technology and marketing, and increased minimum wages, the company’s expenses are anticipated to have escalated and impeded the bottom line. On a sequential basis, management expects third-quarter expenses to be up 4-5%. We project a 4.2% sequential rise in the metric.
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 -1.25%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank Stocks Worth a Look
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp 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 +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.