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Low Fee Income, High Costs Ail Fifth Third (FITB) Q1 Earnings
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Fifth Third Bancorp (FITB - Free Report) is scheduled to report first-quarter 2022 results on Apr 19, before the opening bell. FITB’s March-end quarter’s revenues are expected to have risen, while earnings are anticipated to have declined from the year-ago reported figures.
Before we analyze the factors that are likely to have impacted first-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. FITB’s performance displayed revenue growth, aided by fee and net interest income (NII). Also, benefits from credit losses were tailwinds. However, margin contraction and capital position deterioration played spoilsports.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in all the trailing four quarters, the average being 13.4%.
The Zacks Consensus Estimate for FITB’s first-quarter earnings of 71 cents has been revised marginally downward in the past seven days. Also, the figure indicates a 23.7% decline from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.93 billion, suggesting growth of 0.2% from the year-ago reported figure.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance:
NII: In the first quarter, lending activity witnessed a decent sequential acceleration. Per the Fed’s latest data, there was considerable strength in both commercial and consumer lending, including credit cards, commercial and industrial loans, and residential and commercial real estate loans in January and February. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the first quarter.
Backed by strong pipeline and new commitment growth, management expects average loans and leases (including held-for-sale loans) to sequentially rise 1-2%.
While the Fed increased rates in mid-March, interest rates remained low for the majority of the first quarter. This, along with lower Paycheck Protection Program-related income and fewer days during the quarter, is likely to have hindered net interest margin and NII.
The company expects NII to be down 1% sequentially. Nonetheless, the consensus mark of $1.19 billion for NII indicates a slight increase.
Non-Interest Revenues: Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. Mortgage banking revenues have been facing tough comparisons from the prior year, propelled by low mortgage rates.
However, in the first quarter, mortgage rates increased. At the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rates of around 3%.
Hence, mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity. This, along with lower gains on sale margins, is expected to have affected the company’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $41.8 million, suggesting a 50.9% drop from the prior-year quarter’s reported number.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
The consensus estimate of $152 million for service charges on deposits suggests a 2.6% decline from the previous quarter’s actuals.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $840 million, suggesting a marginal rise sequentially. Fifth Third expects non-interest income to be down 8-9% sequentially.
Expenses: Fifth Third’s investments in areas like technology and inflation-led rise in wages are anticipated to have escalated expenses. Such escalation in costs is likely to have hindered the bottom-line expansion.
On a sequential basis, management expects first-quarter expenses to be up 5-6%.
Key Developments During the Quarter
In mid-January, Fifth Third entered a definitive agreement to acquire Dividend Finance, a leading fintech point-of-sale (POS) lender, which provides financing solutions for sustainability-focused home improvement and residential renewable energy.
The buyout advances Fifth Third’s existing indirect consumer POS capabilities, while improving the bank’s loan portfolio granularity and geographic diversification.
Let’s have a look at what our quantitative model predicts:
Our proven model does not 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 -0.48%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
A couple of finance stocks that 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 Commerce Bancshares, Inc. (CBSH - Free Report) and Associated Banc-Corp (ASB - Free Report) .
The Earnings ESP for Commerce Bancshares is +2.33% and it carries a Zacks Rank #2 (Buy) at present.
CBSH is scheduled to report quarterly numbers on Apr 19.
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Low Fee Income, High Costs Ail Fifth Third (FITB) Q1 Earnings
Fifth Third Bancorp (FITB - Free Report) is scheduled to report first-quarter 2022 results on Apr 19, before the opening bell. FITB’s March-end quarter’s revenues are expected to have risen, while earnings are anticipated to have declined from the year-ago reported figures.
Before we analyze the factors that are likely to have impacted first-quarter earnings, let’s look at Fifth Third’s performance over the last few quarters.
In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. FITB’s performance displayed revenue growth, aided by fee and net interest income (NII). Also, benefits from credit losses were tailwinds. However, margin contraction and capital position deterioration played spoilsports.
The Cincinnati, OH-based lender has an impressive surprise history. Its earnings beat estimates in all the trailing four quarters, the average being 13.4%.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
The Zacks Consensus Estimate for FITB’s first-quarter earnings of 71 cents has been revised marginally downward in the past seven days. Also, the figure indicates a 23.7% decline from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.93 billion, suggesting growth of 0.2% from the year-ago reported figure.
Here are the factors that are expected to have impacted Fifth Third’s quarterly performance:
NII: In the first quarter, lending activity witnessed a decent sequential acceleration. Per the Fed’s latest data, there was considerable strength in both commercial and consumer lending, including credit cards, commercial and industrial loans, and residential and commercial real estate loans in January and February. Given FITB’s significant exposure to commercial loans, the company is likely to have witnessed decent loan growth in the first quarter.
Backed by strong pipeline and new commitment growth, management expects average loans and leases (including held-for-sale loans) to sequentially rise 1-2%.
While the Fed increased rates in mid-March, interest rates remained low for the majority of the first quarter. This, along with lower Paycheck Protection Program-related income and fewer days during the quarter, is likely to have hindered net interest margin and NII.
The company expects NII to be down 1% sequentially. Nonetheless, the consensus mark of $1.19 billion for NII indicates a slight increase.
Non-Interest Revenues: Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. Mortgage banking revenues have been facing tough comparisons from the prior year, propelled by low mortgage rates.
However, in the first quarter, mortgage rates increased. At the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rates of around 3%.
Hence, mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity. This, along with lower gains on sale margins, is expected to have affected the company’s mortgage banking net revenues.
The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $41.8 million, suggesting a 50.9% drop from the prior-year quarter’s reported number.
Wealth and asset management revenues are likely to have felt the heat from disappointing equity market performance in the quarter.
The consensus estimate of $152 million for service charges on deposits suggests a 2.6% decline from the previous quarter’s actuals.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $840 million, suggesting a marginal rise sequentially. Fifth Third expects non-interest income to be down 8-9% sequentially.
Expenses: Fifth Third’s investments in areas like technology and inflation-led rise in wages are anticipated to have escalated expenses. Such escalation in costs is likely to have hindered the bottom-line expansion.
On a sequential basis, management expects first-quarter expenses to be up 5-6%.
Key Developments During the Quarter
In mid-January, Fifth Third entered a definitive agreement to acquire Dividend Finance, a leading fintech point-of-sale (POS) lender, which provides financing solutions for sustainability-focused home improvement and residential renewable energy.
The buyout advances Fifth Third’s existing indirect consumer POS capabilities, while improving the bank’s loan portfolio granularity and geographic diversification.
Let’s have a look at what our quantitative model predicts:
Our proven model does not 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 -0.48%.
Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
A couple of finance stocks that 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 Commerce Bancshares, Inc. (CBSH - Free Report) and Associated Banc-Corp (ASB - Free Report) .
The Earnings ESP for Commerce Bancshares is +2.33% and it carries a Zacks Rank #2 (Buy) at present.
CBSH is scheduled to report quarterly numbers on Apr 19.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Associated BancCorp is slated to report quarterly earnings on Apr 21.
ASB, which sports a Zacks Rank of 1 at present, has an Earnings ESP of +0.81%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.