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What to Expect From Fifth Third (FITB) This Earnings Season

Fifth Third's (FITB) Q4 earnings are likely to reflect growth in net interest and non-interest income, amid rising cost woes on technological investment.

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This story originally appeared on Zacks

Fifth Third Bancorp FITB is scheduled to report fourth-quarter and 2021 results on Jan 20, before the opening bell. FITB’s December-quarter earnings and revenues are expected to have risen from the respective year-ago reported figures.

- Zacks

Before we analyze the factors that might have impacted the fourth-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, benefit from credit losses came as a tailwind. However, results were largely affected by marginally higher expenses and soft loan growth.

This Cincinnati, OH-based lender has an impressive surprise history. Earnings topped estimates in all the trailing four quarters, the average being 19.7%.

Fifth Third Bancorp Price and EPS Surprise

Fifth Third Bancorp Price and EPS Surprise

Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote

FITB’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of 91 cents has been unchanged in the past 30 days. Nonetheless, the figure indicates a 3.4% rise from the year-ago reported figure. The consensus estimate for revenues is pegged at $2.01 billion, suggesting growth of 2.3% from the year-ago reported figure.

Here are the factors that might have impacted Fifth Third ’s quarterly performance:

NII: In the fourth quarter, which is a seasonally strong quarter for loan growth, lending activity witnessed a decent acceleration, sequentially. Per the Fed’s latest data, the commercial and industrial loans, real-estate loans and consumer loan portfolios remained strong in October and November. Amid this, FITB is likely to have witnessed decent loan growth in the fourth quarter.

The steepening of the yield curve (the difference between short and long-term interest rates) is likely to have supported the bank’s net interest margin (NIM). The yield on the 10-year U.S. Treasury Bond of 1.52% at the end of December was up 4 basis points from 1.48% at the end of September. Thus, NII is likely to have got some boost.

Also, the Zacks Consensus Estimate for average interest-earning assets of $186 billion for the quarter indicates a 1.7% rise from the prior quarter’s reported figure. This is expected to have driven interest income for the fourth quarter.

The consensus mark of $1.19 billion for NII indicates a slight increase, sequentially.

Management expects average loans and leases to be up 1%, sequentially. Compared with the prior-quarter level, NII is estimated to be down 1% while net interest margin is projected to decline three-four bps due to compression in loan yields.

Non-Interest Revenues: Per the Fed data, deposits improved in the quarter, led by stimulus-driven liquidity and a rise in money market balances. These are likely to have bolstered revenues from service charges on deposits. The consensus estimate of $154 million for the same suggests a 1.3% rise from the previous quarter’s actuals.

Mortgage rates increased sequentially in the to-be-reported quarter. Also, mortgage origination activities are estimated to have decreased dramatically, with the rising rates hampering refinancing activity. The Zacks Consensus Estimate for mortgage banking net revenues is pegged at $55 million, suggesting a 36% drop from the prior quarter’s reported number.

Card fees are likely to have improved on higher consumer spending owing to a decreased unemployment level and upbeat consumer optimism.

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 up 6%, sequentially.

Expenses: Fifth Third’s ongoing strategic investments in areas like technology might have escalated expenses. Such escalation in costs might hinder bottom-line expansion in the upcoming period.

On a sequential basis, excluding seasonal items, management expects expenses to be flat to up 1% in the fourth 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 -1.27%.

Zacks Rank: Fifth Third currently carries a Zacks Rank of 3.

Stocks That Warrant a Look

BOK Financial BOKF, The PNC Financial Services Group, Inc. PNC and Huntington Bancshares Incorporated HBAN are a few companies worth considering as these have the right combination of elements to beat on earnings in their upcoming releases, per our model.

BOK Financial has an Earnings ESP of +3.64% and a Zacks Rank of 3 at present. BOKF is slated to report fourth-quarter and full-year results on Jan 19.

Over the past 30 days, BOKF’s Zacks Consensus Estimate for quarterly earnings has moved marginally downward.

PNC Financial is scheduled to release fourth-quarter 2021 and annual earnings on Jan 18. PNC, which is Zacks #3 Ranked at present, has an Earnings ESP of +2.29%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNC’s fourth-quarter earnings estimates have moved marginally lower over the past month.

Huntington Bancshares is scheduled to release earnings on Jan 21. HBAN, currently a #3 Ranked player, has an Earnings ESP of +1.46%.

The Zacks Consensus Estimate for Huntington Bancshares’ fourth-quarter earnings has remained unchanged over the past month.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.



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