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Bank Stock Roundup: Q4 Earnings in Full Swing, SunTrust, Fifth Third Beat Estimates

Zacks Equity Research

Over the last four trading days, performance of major banks was disappointing. While the banks reported decent fourth-quarter results amid a tough operating backdrop, management commentary pertaining to this year’s performance seems to have not met investors’ expectations.

Looking at the major banks’ financial performance in the fourth quarter, most of the banks witnessed an increase in revenues, mostly driven by loan growth and higher interest rates. Also, improving asset quality rendered support.

Further, non-interest expenses remained manageable despite banks’ efforts to digitize operations and improve market share. Nevertheless, investment banking business underperformed, impacted by disappointing underwriting business, partly muted by strong financial advisory revenues. Also, mortgage banking business was disappointing.



(Read: Bank Stock Roundup for the Week Ending Jan 18, 2019)

Important Earnings of the Week

1. SunTrust Banks' STI fourth-quarter 2018 adjusted earnings of $1.50 per share outpaced the Zacks Consensus Estimate of $1.40. Also, the figure compared favorably with the prior-year quarter’s adjusted earnings of $1.09. Results were driven by rise in net interest income and lower expenses. However, a decline in non-interest income and higher credit costs were the undermining factors. (Read more: SunTrust Q4 Earnings Top as Revenues Rise, Costs Fall)

2. Regions Financial RF reported fourth-quarter 2018 earnings of 37 cents per share, up 42% year over year. The Zacks Consensus Estimate was pegged at 38 cents. Results included certain non-recurring items. Easing margin pressure, lower expenses and higher revenues were the positive factors. However, lower deposits balance was an undermining factor. In addition, lower fee income, backed by reduced capital markets and mortgage banking income, were major drags. (Read more: Regions Financial's Q4 Earnings Improve Y/Y, Costs Down)

3. Fifth Third Bancorp FITB delivered a positive earnings surprise of 3% in fourth-quarter 2018. Adjusted earnings per share of 69 cents surpassed the Zacks Consensus Estimate of 67 cents. However, including certain one-time items, the bottom line came in at 64 cents, down 9% year over year. Increase in revenues, aided by rising loans and deposits, was a driving factor. However, higher provisions and lower non-interest income were the undermining factors. (Read more: Fifth Third's Q4 Earnings Beat on Higher Revenues)

4. Capital One’s COF fourth-quarter 2018 adjusted earnings of $1.87 per share lagged the Zacks Consensus Estimate of $2.40. However, it compared favorably with the year-ago quarter’s adjusted earnings of $1.62. Lower non-interest income and an increase in operating expenses hurt the results to some extent. However, rise in net interest income, a decline in provision for credit losses and improving loans and deposits were the tailwinds. (Read more: Capital One Tanks 5.3% on Q4 Earnings & Revenue Miss)

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

-1.8%

-6.5%

BAC

-0.8%

-2.5%

WFC

-0.1%

-10.3%

C

-0.6%

-9.0%

COF

-4.9%

-16.1%

USB

1.3%

1.9%

PNC

-1.1%

-11.7%


Over the last four trading sessions, Capital One and JPMorgan were the major losers, with their shares declining 4.9% and 1.8%, respectively. On the other hand, shares of U.S. Bancorp have rallied 1.3%.

In the past six months, shares of Capital One and PNC Financial have lost 16.1% and 11.7%, respectively. However, shares U.S. Bancorp have gained 1.9%.

What’s Next?

Over the next five trading days, focus will solely be on earnings releases. Of the banks scheduled to release fourth-quarter earnings, UMB Financial Corporation UMBF will report on Jan 29 while Prosperity Bancshares, Inc. PB and New York Community Bancorp, Inc. NYCB will release numbers on Jan 30.

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