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Fee Income to Aid Fifth Third's (FITB) Q4 Earnings, NII to Hurt
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report its fourth-quarter and full year 2023 results on Jan 19, before the opening bell. Its revenues and earnings are likely to have declined in the to-be-reported quarter on a year-over-year basis.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. Results were aided by a rise in non-interest income and deposit balance. However, a fall in net interest income (NII) limited its revenue growth. Higher expenses, and a decline in average loan and lease balance were undermining factors.
This Cincinnati, OH-based lender has an impressive earnings surprise history. Its earnings beat estimates in three of the trailing four quarters and missed once, the surprise being 5.20%, on average.
The Zacks Consensus Estimate for FITB’s fourth-quarter earnings of 90 cents per share has remained unchanged over the past 60 days. Also, the figure indicates a fall of 13.5% from the year-ago number.
The consensus estimate for revenues is pegged at $2.15 billion, suggesting a decrease of 6.9% from the year-ago figure. Management expects adjusted total revenues to be flat to down 1% on a sequential basis.
Here are the factors expected to have impacted Fifth Third’s quarterly performance.
Loans and NII: Per Fed’s latest data, demand for consumer loans as well as commercial real estate loans showed signs of improvement in November from third-quarter 2023 levels. This is likely to have positively impacted the company’s average interest earning assets during the quarter to some extent. However, demand for commercial and industrial loans weakened in the first two months of the quarter under review from third-quarter 2023 figures.
Given FITB’s significant exposure to commercial loans, the bank is likely to have witnessed a decline in loan growth in the quarter under discussion. In fact, the company expects total average loans and leases (including held-for-sale loans) to be sequentially down 2-3% for the quarter under review. Nonetheless, the Zacks Consensus Estimate for average interest-earning assets of $193.89 billion for the quarter indicates a nearly 1% decline from the prior quarter.
Federal Reserve paused interest rate hikes during fourth-quarter 2023. Yet, interest rates remained at a 22-year high of 5.25-5.5%. NII growth and margins in the quarter under review is likely to have been affected by an increase in funding costs given the high interest rates.
The company expects adjusted NII (FTE basis) to be down 1-2% sequentially. Also, the consensus mark for NII (FTE basis) of $1.42 billion indicates a 1.9% decrease sequentially. Our estimate matches the consensus mark.
Non-Interest Revenues: In a high interest rate environment, customers have been moving their investments to other higher yielding assets. This is likely to have led to a decline in deposit balances, hurting service charges on deposits. The consensus estimate for the metric of $148 million suggests a 1% decline sequentially. Our estimate is pegged at $144.6 million
Global deal making witnessed a slight rebound in the fourth quarter, and green shoots were observed in capital markets and issuance activities. Notably, at Goldman Sachs’ U.S. Financial Services Conferenceheld in early December, bank executives stated that global deal-making conditions have started to improve. The major factor driving a better picture was the stabilizing interest rate environment.
With an increase in mergers and acquisition (M&A) volumes, M&A advisory revenues are expected to have improved, positively impacting commercial banking revenues. The Zacks Consensus Estimate for commercial banking revenues is pegged at $159 million, rising 3.2% from the prior quarter. We project the metric to be $157 million.
In the quarter under review, mortgage rates started to decrease, with the rate on a 30-year fixed mortgage declining to 6.62% as of Dec 31, 2023, from 7.31% recorded at the beginning of the quarter. Though mortgage rates declined, it remain sufficiently high, keeping home buyers on the sidelines. This is likely to have led to a smaller origination market, both purchase and refinancing, compared with the prior quarter.
These factors are expected to have affected Fifth Third’s mortgage banking revenues in the to-be-reported quarter to some extent. The Zacks Consensus Estimate is pegged at $57 million, remaining flat from the prior quarter’s reported figure.
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 $145 million,remainingflat from the prior quarter. Our estimate is pinned at $145.5 million.
Overall, management expects non-interest income to be up 1-2% on a sequential basis in the quarter to be reported. The Zacks Consensus Estimate for non-interest income is pegged at $746 million, which indicates a 4.3% rise from the prior quarter.
Expenses: Owing to strategic investments aimed at operational efficiencies in technology and marketing, higher compensation and benefits expenses as well as initiatives such as branch digitization and marketing expenses, the company’s expense base is anticipated to have escalated and impeded bottom-line growth.
On a sequential basis, management expects adjusted non-interest expenses to be stable to up 1%. We estimate total expenses to rise marginally on a sequential basis to $1.91 billion.
What the Zacks Model Reveals
According to our quantitative model, the chances of First Third beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of two key ingredients, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
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 -1.15%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
A couple of 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 Independent Bank Corporation (IBCP - Free Report) .
ASB is scheduled to release quarterly earnings on Jan 25. The company has a Zacks Rank #3 and an Earnings ESP of +5.36% at present.
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Fee Income to Aid Fifth Third's (FITB) Q4 Earnings, NII to Hurt
Fifth Third Bancorp (FITB - Free Report) is scheduled to report its fourth-quarter and full year 2023 results on Jan 19, before the opening bell. Its revenues and earnings are likely to have declined in the to-be-reported quarter on a year-over-year basis.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. Results were aided by a rise in non-interest income and deposit balance. However, a fall in net interest income (NII) limited its revenue growth. Higher expenses, and a decline in average loan and lease balance were undermining factors.
This Cincinnati, OH-based lender has an impressive earnings surprise history. Its earnings beat estimates in three of the trailing four quarters and missed once, the surprise being 5.20%, on average.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
The Zacks Consensus Estimate for FITB’s fourth-quarter earnings of 90 cents per share has remained unchanged over the past 60 days. Also, the figure indicates a fall of 13.5% from the year-ago number.
The consensus estimate for revenues is pegged at $2.15 billion, suggesting a decrease of 6.9% from the year-ago figure. Management expects adjusted total revenues to be flat to down 1% on a sequential basis.
Here are the factors expected to have impacted Fifth Third’s quarterly performance.
Loans and NII: Per Fed’s latest data, demand for consumer loans as well as commercial real estate loans showed signs of improvement in November from third-quarter 2023 levels. This is likely to have positively impacted the company’s average interest earning assets during the quarter to some extent. However, demand for commercial and industrial loans weakened in the first two months of the quarter under review from third-quarter 2023 figures.
Given FITB’s significant exposure to commercial loans, the bank is likely to have witnessed a decline in loan growth in the quarter under discussion. In fact, the company expects total average loans and leases (including held-for-sale loans) to be sequentially down 2-3% for the quarter under review. Nonetheless, the Zacks Consensus Estimate for average interest-earning assets of $193.89 billion for the quarter indicates a nearly 1% decline from the prior quarter.
Federal Reserve paused interest rate hikes during fourth-quarter 2023. Yet, interest rates remained at a 22-year high of 5.25-5.5%. NII growth and margins in the quarter under review is likely to have been affected by an increase in funding costs given the high interest rates.
The company expects adjusted NII (FTE basis) to be down 1-2% sequentially. Also, the consensus mark for NII (FTE basis) of $1.42 billion indicates a 1.9% decrease sequentially. Our estimate matches the consensus mark.
Non-Interest Revenues: In a high interest rate environment, customers have been moving their investments to other higher yielding assets. This is likely to have led to a decline in deposit balances, hurting service charges on deposits. The consensus estimate for the metric of $148 million suggests a 1% decline sequentially. Our estimate is pegged at $144.6 million
Global deal making witnessed a slight rebound in the fourth quarter, and green shoots were observed in capital markets and issuance activities. Notably, at Goldman Sachs’ U.S. Financial Services Conferenceheld in early December, bank executives stated that global deal-making conditions have started to improve. The major factor driving a better picture was the stabilizing interest rate environment.
With an increase in mergers and acquisition (M&A) volumes, M&A advisory revenues are expected to have improved, positively impacting commercial banking revenues. The Zacks Consensus Estimate for commercial banking revenues is pegged at $159 million, rising 3.2% from the prior quarter. We project the metric to be $157 million.
In the quarter under review, mortgage rates started to decrease, with the rate on a 30-year fixed mortgage declining to 6.62% as of Dec 31, 2023, from 7.31% recorded at the beginning of the quarter. Though mortgage rates declined, it remain sufficiently high, keeping home buyers on the sidelines. This is likely to have led to a smaller origination market, both purchase and refinancing, compared with the prior quarter.
These factors are expected to have affected Fifth Third’s mortgage banking revenues in the to-be-reported quarter to some extent. The Zacks Consensus Estimate is pegged at $57 million, remaining flat from the prior quarter’s reported figure.
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 $145 million,remainingflat from the prior quarter. Our estimate is pinned at $145.5 million.
Overall, management expects non-interest income to be up 1-2% on a sequential basis in the quarter to be reported. The Zacks Consensus Estimate for non-interest income is pegged at $746 million, which indicates a 4.3% rise from the prior quarter.
Expenses: Owing to strategic investments aimed at operational efficiencies in technology and marketing, higher compensation and benefits expenses as well as initiatives such as branch digitization and marketing expenses, the company’s expense base is anticipated to have escalated and impeded bottom-line growth.
On a sequential basis, management expects adjusted non-interest expenses to be stable to up 1%. We estimate total expenses to rise marginally on a sequential basis to $1.91 billion.
What the Zacks Model Reveals
According to our quantitative model, the chances of First Third beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of two key ingredients, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
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 -1.15%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
A couple of 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 Independent Bank Corporation (IBCP - Free Report) .
ASB is scheduled to release quarterly earnings on Jan 25. The company has a Zacks Rank #3 and an Earnings ESP of +5.36% at present.
IBCP is is slated to report quarterly results on Jan 25. It has an Earnings ESP of +8.45% and sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.