Fifth Third (FITB) Q3 Earnings & Revenues Miss Estimates

Fifth Third Bancorp FITB has reported third-quarter 2022 earnings per share or EPS of 93 cents (excluding after-tax impacts of certain items), missing the Zacks Consensus Estimate of 98 cents. In the prior-year quarter, the company reported EPS of 97 cents.

A significant fall in the fee income limited revenue growth, while higher provision for credit losses and lower deposits were undermining factors. Nonetheless, higher net interest income (NII), lower expenses, and improved average loans and lease balances were positives.

Management noted, “We generated record adjusted revenue driven by interest-earning assets growth combined with a 30 basis point improvement in our net interest margin. We also achieved one of our lowest adjusted efficiency ratios over the past decade reflecting our expense discipline.”

The company has reported net income available to common shareholders of $631 million, down 8% year over year.

Revenues Rise on Higher NII, Expenses & Deposits Decline

Total revenues (on a fully taxable-equivalent or FTE basis) in the reported quarter were $2.17 billion, up 7.4% year over year. However, the revenue figure missed the Zacks Consensus Estimate of $2.19 billion.Our estimate for the same was pegged at $2.14 billion.

Fifth Third’s NII (on an FTE basis) was $1.50 billion, up 26% year over year. It primarily reflects the benefits of higher market rates and growth in investment portfolio balances, partially offset by lower Paycheck Protection Program-related income and a decline in interest income from government mortgage buyouts.Our estimate for the same was pegged at $1.49 billion.

Net interest margin (NIM) (on an FTE basis) rose 63 basis points (bps) year over year to 3.22%.

Non-interest income fell 20% year over year to $672 million. This was primarily due to a decline in commercial banking revenues, mortgage banking net revenues, wealth and asset management revenues, and leasing business revenues.We projected the same to be $653.9 million.

Non-interest expenses decreased marginally from the prior-year quarter to $1.17 billion. The main reasons for the decrease in non-interest expenses were lower compensation and benefits, and net occupancy expenses.

As of Sep 30, 2022, average loan and lease balances and average total deposits were $119.64 billion and $159. billion, respectively. Loans increased 2% on a sequential basis, whereas deposits decreased 2%.

Credit Quality Deteriorates

The company has reported a provision for credit losses of $158 million against the benefits of $42 million in the year-ago quarter. Net losses charged-off in the third quarter were $62 million or 0.21% of average loans and leases (on an annualized basis) compared with the $21 million or 0.08% witnessed in the prior-year quarter. The total allowance for credit losses increased 6.4% to $2.29 billion.

Nonetheless, total non-performing assets were $546 million, down 2.3% from the year-ago quarter.

Capital Position Weak

Tier 1 risk-based capital ratio was 10.38% compared with the 11.28% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.11%, down from 9.86% recorded at the end of the year-ago quarter. Nonetheless, the leverage ratio was 8.44% compared with the year-earlier quarter’s 8.41%.

Our Viewpoint

The rise in revenues of the company was backed by increased NII. The improvement in NIM was backed by higher rates. However, a decrease in total deposits and a weak capital position were concerning.

Fifth Third Bancorp Price, Consensus and EPS Surprise

 

Fifth Third Bancorp Price, Consensus and EPS Surprise

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

Currently, Fifth Third carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Northern Trust Corporation’s NTRS third-quarter 2022 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.82. Nonetheless, the bottom line was flat year over year.

Higher revenues, aided by a rise in net interest income NII, were driving factors for NTRS. However, a rising expense base and weak capital ratios were headwinds.

Citizens Financial Group CFG reported third-quarter 2022 underlying earnings per share of $1.30, surpassing the Zacks Consensus Estimate of $1.20. Also, CFG’s bottom line rose from $1.22 in the year-ago quarter.

Results reflect NII growth on the rise in loan balances. However, an escalation in expenses was a spoilsport for Citizens Financial’s third-quarter results.

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