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Dismal Fee Income to Impact Fifth Third's (FITB) Q1 Earnings
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report first-quarter 2020 results on Apr 21, before the opening bell. The company’s earnings and revenues are expected to have declined year over year.
This Cincinnati, OH-based lender has an impressive earnings surprise history. It topped earnings in three of the trailing four quarters and missed in the other, the average positive surprise being 2.56%.
In the last reported quarter, the bank’s earnings lagged the Zacks Consensus Estimate. Results reflected higher expenses and provisions. Also, the deterioration of credit quality was a headwind. However, an increase in revenues, aided by higher interest income and fee income, was a positive factor.
Here are the factors that might have influenced the company’s quarterly performance:
Muted Net Interest Income Growth: The Fed slashed interest rates to near zero this March, in order to shield the U.S. economy from the coronavirus-related mayhem. This is likely to have substantially hurt the company’s net interest margin and net interest income. However, low deposit costs might have been an offsetting factor for margins.
Moreover, a soft lending scenario is predicted to have curtailed growth in net interest income to some extent. Notably, the Zacks Consensus Estimate for average interest earning assets of $148.8 billion for the quarter indicates a marginal sequential decrease, while the NII is expected to decline 2.4% to $1.2 billion.
Management expects interest-bearing core deposit costs to shrink another 8-10 basis points (bps) from fourth-quarter 2019, assuming the Fed remains on hold. Based on this assumption, NII is expected to be down 2% sequentially, impacted by day count and some seasonality in securities portfolio and Commercial DDAs. The NIM is expected to expand 1-2 bps sequentially, reflecting increased benefits from the previously-executed hedges. Average loans and leases are anticipated to be have been stable sequentially.
Dismal Non-Interest Revenues: Due to the pandemic, a slowdown in economic activity in the quarter is likely to have strained fee income. Outflows from the asset-management business might have been recorded on market losses. Also, significant declines in the prices of asset values are expected to have impacted asset-management fees.
Further, lower consumer spending might have hurt card fees due to the pandemic toward the tail end of the quarter. The Zacks Consensus Estimate for card and processing revenues of $93 million indicates a 2.1% decline from the prior-quarter reported number.
In addition, the Federal Reserve’s accommodative monetary policy and decline in mortgage rates during the first quarter drove refinancing activities, while growth in new originations was muted. Apart from this, a rise in demand for residential real estate loans is anticipated to have supported Fifth Third’s mortgage banking income. Notably, the consensus estimate of $66 million for mortgage banking revenues projects a decline of 9.6% sequentially.
Weak equity markets resulted in a decline in follow-up equity issuances, while IPOs flourished. Thus, equity underwriting fees are expected to have declined. Furthermore, global M&A activity during the March-end quarter was significantly hampered amid the coronavirus outbreak, which might have hurt the company’s corporate services fees to an extent. Therefore, the consensus estimate of $145 million for corporate banking revenues projects a decline of 5.2% sequentially.
The Zacks Consensus Estimate for non-interest income is projected at $708 million, down 31.6% sequentially. Notably, management expects fee income to be down 3%.
Controlled Expenses: Fifth Third’s ongoing strategic investments in several areas, such as technology, might have escalated expenses. However, the company is expected to have been successful in offsetting this rise through North Star initiatives.
For the first quarter, management expects non-interest expenses to rise 5% sequentially. Excluding the $70-million seasonal employee-expense impact, expenses are likely to be down 1%. Notably, the company expects $255 million in annual savings from the MB acquisition by the end of the first quarter.
Let’s have a look at what our quantitative model predicts:
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 -41.56%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 5 (Strong Sell).
The company’s activities in the first quarter were inadequate to impress analysts. Hence, the Zacks Consensus Estimate for earnings of 23 cents for the quarter has been revised downward over the past 30 days. Also, the figure indicates a 63.5% slump from the year-ago quarter reported number.
The consensus estimate for Fifth Third’s revenues for the quarter is pegged at $1.89 billion, which suggests a 13.3% fall from the year-ago reported figure.
Here are a few stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.
SB ONE BANCORP is likely to release earnings figures around Apr 28. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.85%.
The Earnings ESP for Carolina Financial Corporation is +1.43% and the stock carries a Zacks Rank of 3, currently. The company is expected to report quarterly numbers around Apr 22.
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Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Dismal Fee Income to Impact Fifth Third's (FITB) Q1 Earnings
Fifth Third Bancorp (FITB - Free Report) is scheduled to report first-quarter 2020 results on Apr 21, before the opening bell. The company’s earnings and revenues are expected to have declined year over year.
This Cincinnati, OH-based lender has an impressive earnings surprise history. It topped earnings in three of the trailing four quarters and missed in the other, the average positive surprise being 2.56%.
In the last reported quarter, the bank’s earnings lagged the Zacks Consensus Estimate. Results reflected higher expenses and provisions. Also, the deterioration of credit quality was a headwind. However, an increase in revenues, aided by higher interest income and fee income, was a positive factor.
Here are the factors that might have influenced the company’s quarterly performance:
Muted Net Interest Income Growth: The Fed slashed interest rates to near zero this March, in order to shield the U.S. economy from the coronavirus-related mayhem. This is likely to have substantially hurt the company’s net interest margin and net interest income. However, low deposit costs might have been an offsetting factor for margins.
Moreover, a soft lending scenario is predicted to have curtailed growth in net interest income to some extent. Notably, the Zacks Consensus Estimate for average interest earning assets of $148.8 billion for the quarter indicates a marginal sequential decrease, while the NII is expected to decline 2.4% to $1.2 billion.
Management expects interest-bearing core deposit costs to shrink another 8-10 basis points (bps) from fourth-quarter 2019, assuming the Fed remains on hold. Based on this assumption, NII is expected to be down 2% sequentially, impacted by day count and some seasonality in securities portfolio and Commercial DDAs. The NIM is expected to expand 1-2 bps sequentially, reflecting increased benefits from the previously-executed hedges. Average loans and leases are anticipated to be have been stable sequentially.
Dismal Non-Interest Revenues: Due to the pandemic, a slowdown in economic activity in the quarter is likely to have strained fee income. Outflows from the asset-management business might have been recorded on market losses. Also, significant declines in the prices of asset values are expected to have impacted asset-management fees.
Further, lower consumer spending might have hurt card fees due to the pandemic toward the tail end of the quarter. The Zacks Consensus Estimate for card and processing revenues of $93 million indicates a 2.1% decline from the prior-quarter reported number.
In addition, the Federal Reserve’s accommodative monetary policy and decline in mortgage rates during the first quarter drove refinancing activities, while growth in new originations was muted. Apart from this, a rise in demand for residential real estate loans is anticipated to have supported Fifth Third’s mortgage banking income. Notably, the consensus estimate of $66 million for mortgage banking revenues projects a decline of 9.6% sequentially.
Weak equity markets resulted in a decline in follow-up equity issuances, while IPOs flourished. Thus, equity underwriting fees are expected to have declined. Furthermore, global M&A activity during the March-end quarter was significantly hampered amid the coronavirus outbreak, which might have hurt the company’s corporate services fees to an extent. Therefore, the consensus estimate of $145 million for corporate banking revenues projects a decline of 5.2% sequentially.
The Zacks Consensus Estimate for non-interest income is projected at $708 million, down 31.6% sequentially. Notably, management expects fee income to be down 3%.
Controlled Expenses: Fifth Third’s ongoing strategic investments in several areas, such as technology, might have escalated expenses. However, the company is expected to have been successful in offsetting this rise through North Star initiatives.
For the first quarter, management expects non-interest expenses to rise 5% sequentially. Excluding the $70-million seasonal employee-expense impact, expenses are likely to be down 1%. Notably, the company expects $255 million in annual savings from the MB acquisition by the end of the first quarter.
Let’s have a look at what our quantitative model predicts:
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 -41.56%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 5 (Strong Sell).
The company’s activities in the first quarter were inadequate to impress analysts. Hence, the Zacks Consensus Estimate for earnings of 23 cents for the quarter has been revised downward over the past 30 days. Also, the figure indicates a 63.5% slump from the year-ago quarter reported number.
The consensus estimate for Fifth Third’s revenues for the quarter is pegged at $1.89 billion, which suggests a 13.3% fall from the year-ago reported figure.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
Stocks That Warrant a Look
Here are a few stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.
BCB Bancorp, Inc. (NJ) (BCBP - Free Report) is expected to release results around Apr 22. The company has an Earnings ESP of +4.17% and currently carries a Zacks Rank of 3. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SB ONE BANCORP is likely to release earnings figures around Apr 28. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.85%.
The Earnings ESP for Carolina Financial Corporation is +1.43% and the stock carries a Zacks Rank of 3, currently. The company is expected to report quarterly numbers around Apr 22.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>