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Fifth Third (FITB) Set to Report Q2 Earnings: What's in Store?
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report second-quarter 2023 results on Jul 20, before the opening bell. Its quarterly revenues and earnings are expected to have risen from the year-ago reported figures.
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 missed the Zacks Consensus Estimate. A significant rise in the fee income and net interest income (NII) aided revenue growth, while higher provisions for credit losses and lower deposits were the undermining factors.
The Cincinnati, OH-based lender has a disappointing surprise history. Its earnings beat estimates in one of the trailing four quarters and missed thrice, the negative surprise being 2.63%.
The Zacks Consensus Estimate for FITB’s second-quarter earnings of 83 cents per share has been revised marginally downward in the past week. Nonetheless, the figure indicates a 5.1% rise from the year-ago reported number. Our estimate is pinned at 82 cents.
The consensus estimate for revenues is pegged at $2.18 billion, suggesting growth of 8.4% from the year-ago reported figure. Our estimate is pinned at $2.19 billion. The company expects a 2-3% sequential decline in revenues in the quarter.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
Loans and NII: Lending activities gradually waned in the quarter amid a challenging macroeconomic backdrop. Per the Federal Reserve’s latest data, the demand for commercial and industrial loans, as well as real estate loans, were soft in April and May.
Given FITB’s significant exposure to commercial loans, the bank is likely to have witnessed a decline in loan growth in the quarter under review. It expects total average loans and leases (including held-for-sale loans) to be flat. Nonetheless, the Zacks Consensus Estimate of $188.9 million for average interest-earning assets for the quarter indicates a marginal rise from the prior quarter’s reported figure.
The Federal Reserve hiked rates by 25 basis points (bps) in the to-be-reported. With this, the policy rate now stands at a 15-year high of 5-5.25%. Successive rate hikes are likely to have limited any further positive impact on the company’s NII.
Hence, with the lower-to-no-positive impact of higher market rates, muted loan growth and a rise in deposit costs, the bank’s NII and net interest margin (NIM) are likely to have been affected in the quarter.
The company expects NII (FTE basis) to be down 4-5% sequentially. Also, the consensus mark of $1.45 billion for the metric indicates a 6.1% decrease sequentially. Our estimate is pinned at $1.5 billion.
Non-Interest Revenues: Global deal-making continued to shrink on a year-over-year basis in the second quarter, while green shoots were visible toward the end of the quarter. A host of factors like geopolitical tensions, stand-off over the U.S. debt ceiling, inflation, rising interest rates and fears of a global recession acted as major headwinds. Thus, the deal volume and total value numbers crashed in the second 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 Zacks Consensus Estimate for commercial banking revenues is pegged at $159 million, suggesting a 1.2% fall from the prior quarter’s reported number. Our estimate is pinned at $145.6 million.
Also, a likely decline in deposit balances is expected to have hurt service charges on deposits. The consensus estimate of $137 million for the metric is flat on a sequential basis. Our estimate is pinned at $138.7 million.
Mortgage originations, both purchase and refinancing, continued to decline in the second quarter. Mortgage banking revenues have also been facing tough comps from the prior year, which were boosted by lower mortgage rates. In the to-be-reported quarter, mortgage rates continued to rise, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from the 4.6% reported in the prior-year quarter.
Higher mortgage rates, which kept home buyers on the sidelines, led to a smaller origination volume. This is anticipated to have reduced the company’s origination fees. The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $66 million, suggesting a 4.3% fall from the prior quarter’s reported number. Our estimate is pinned at $36.6 million.
Wealth and asset management revenues are likely to have gained from higher equity market performance in the quarter. The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $149 million, suggesting a marginal rise from the prior quarter’s reported number. Our estimate is pinned at $140 million.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $720 million, suggesting a 3.4% rise sequentially. Fifth Third expects adjusted non-interest income to rise 2-3% sequentially. Our estimate is pinned at $686.6 million.
Expenses: Owing to strategic investments aimed at operational efficiencies in technology and marketing, and increased minimum wages, the company’s expenses are anticipated to have escalated and impeded bottom-line growth. Nonetheless, on a sequential basis, management expects expenses to be down 8-9%.
What Our Quantitative Model Predicts:
Our proven model does not conclusively predict an earnings beat for FITB this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. 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 -0.78%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
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Fifth Third (FITB) Set to Report Q2 Earnings: What's in Store?
Fifth Third Bancorp (FITB - Free Report) is scheduled to report second-quarter 2023 results on Jul 20, before the opening bell. Its quarterly revenues and earnings are expected to have risen from the year-ago reported figures.
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 missed the Zacks Consensus Estimate. A significant rise in the fee income and net interest income (NII) aided revenue growth, while higher provisions for credit losses and lower deposits were the undermining factors.
The Cincinnati, OH-based lender has a disappointing surprise history. Its earnings beat estimates in one of the trailing four quarters and missed thrice, the negative surprise being 2.63%.
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 83 cents per share has been revised marginally downward in the past week. Nonetheless, the figure indicates a 5.1% rise from the year-ago reported number. Our estimate is pinned at 82 cents.
The consensus estimate for revenues is pegged at $2.18 billion, suggesting growth of 8.4% from the year-ago reported figure. Our estimate is pinned at $2.19 billion. The company expects a 2-3% sequential decline in revenues in the quarter.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance.
Loans and NII: Lending activities gradually waned in the quarter amid a challenging macroeconomic backdrop. Per the Federal Reserve’s latest data, the demand for commercial and industrial loans, as well as real estate loans, were soft in April and May.
Given FITB’s significant exposure to commercial loans, the bank is likely to have witnessed a decline in loan growth in the quarter under review. It expects total average loans and leases (including held-for-sale loans) to be flat. Nonetheless, the Zacks Consensus Estimate of $188.9 million for average interest-earning assets for the quarter indicates a marginal rise from the prior quarter’s reported figure.
The Federal Reserve hiked rates by 25 basis points (bps) in the to-be-reported. With this, the policy rate now stands at a 15-year high of 5-5.25%. Successive rate hikes are likely to have limited any further positive impact on the company’s NII.
Hence, with the lower-to-no-positive impact of higher market rates, muted loan growth and a rise in deposit costs, the bank’s NII and net interest margin (NIM) are likely to have been affected in the quarter.
The company expects NII (FTE basis) to be down 4-5% sequentially. Also, the consensus mark of $1.45 billion for the metric indicates a 6.1% decrease sequentially. Our estimate is pinned at $1.5 billion.
Non-Interest Revenues: Global deal-making continued to shrink on a year-over-year basis in the second quarter, while green shoots were visible toward the end of the quarter. A host of factors like geopolitical tensions, stand-off over the U.S. debt ceiling, inflation, rising interest rates and fears of a global recession acted as major headwinds. Thus, the deal volume and total value numbers crashed in the second 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 Zacks Consensus Estimate for commercial banking revenues is pegged at $159 million, suggesting a 1.2% fall from the prior quarter’s reported number. Our estimate is pinned at $145.6 million.
Also, a likely decline in deposit balances is expected to have hurt service charges on deposits. The consensus estimate of $137 million for the metric is flat on a sequential basis. Our estimate is pinned at $138.7 million.
Mortgage originations, both purchase and refinancing, continued to decline in the second quarter. Mortgage banking revenues have also been facing tough comps from the prior year, which were boosted by lower mortgage rates. In the to-be-reported quarter, mortgage rates continued to rise, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from the 4.6% reported in the prior-year quarter.
Higher mortgage rates, which kept home buyers on the sidelines, led to a smaller origination volume. This is anticipated to have reduced the company’s origination fees. The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $66 million, suggesting a 4.3% fall from the prior quarter’s reported number. Our estimate is pinned at $36.6 million.
Wealth and asset management revenues are likely to have gained from higher equity market performance in the quarter. The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $149 million, suggesting a marginal rise from the prior quarter’s reported number. Our estimate is pinned at $140 million.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $720 million, suggesting a 3.4% rise sequentially. Fifth Third expects adjusted non-interest income to rise 2-3% sequentially. Our estimate is pinned at $686.6 million.
Expenses: Owing to strategic investments aimed at operational efficiencies in technology and marketing, and increased minimum wages, the company’s expenses are anticipated to have escalated and impeded bottom-line growth. Nonetheless, on a sequential basis, management expects expenses to be down 8-9%.
What Our Quantitative Model Predicts:
Our proven model does not conclusively predict an earnings beat for FITB this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. 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 -0.78%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BY is scheduled to release second-quarter 2023 results on Jul 27. It currently has an Earnings ESP of +3.59% and a Zacks Rank #3.
The Zacks Consensus Estimate for BY’s second-quarter earnings has been unchanged over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.