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Bank Stocks' Q3 Earnings Due on Oct 23: HBAN, FITB & RF

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Bank Stocks' Q3 Earnings Due on Oct 23: HBAN, FITB & RF

Banks' Q3 earnings are expected to be driven by higher interest rates and decent loan growth. Also, a slight improvement in fee income will likely provide some support.

Earnings season for banks had a decent start and the results released so far indicate higher revenues supported by improved loan balances and expansion of margin. However, lower mortgage income and dismal investment banking performance adversely impacted fee income to some extent.

On the cost front, while the absence of considerable legal expenses is encouraging, increased investments in technology to improve digital offerings have escalated costs moderately.

Per the latest Earnings Preview, overall earnings for the finance sector in the third quarter are projected to jump 35.4% year over year. This compares favorably with prior quarter’s earnings growth of 21.5%.

Therefore, this seems to be the right time to add a few bank stocks in case they beat earnings estimates.

Earnings releases will be coming in thick this week with Huntington Bancshares HBAN, Fifth Third Bancorp FITB and Regions Financial Corporation RF scheduled to report on Oct 23, before the opening bell.

Let’s have a look at what can be expected from these three banks’ third-quarter 2018 earnings.

Huntington’s earnings are expected to be 32 cents, reflecting 28% improvement from the last-year quarter.

Moderate improvement in lending scenario along with rising interest rates are likely to have perked up the company’s interest income. Also, rise in interest earning assets is likely to support top-line growth. The Zacks Consensus Estimate for earnings assets of $97.8 billion reflects 5.3% year-over-year rise.

However, slowdown in mortgage activities and muted investment banking activities during the quarter are likely weigh on fee income growth. The consensus estimate for revenues of $1.16 billion reflects a rise of 6.2% from the prior-year quarter.

(Read more: Will Stable Fee Income Hurt Huntington’s Q3 Earnings?)

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

The story about the company’s decent earnings surprise history is better told by the chart below:

Huntington Bancshares Incorporated Price and EPS Surprise

Huntington Bancshares Incorporated Price and EPS Surprise | Huntington Bancshares Incorporated Quote

Fifth Third’s earnings and revenues are expected to improve in the to-be-reported quarter. The Zacks Consensus Estimate for earnings is 63 cents, reflecting year-over-year increase of 31.3%. Further, the consensus estimate for sales of $1.63billion indicates 5.6% increase.

Growth in commercial and consumer loans is expected to have led to improvement in net interest income. Further, Fifth Third’s strategic initiatives that focus on strengthening its fee income base should lend support this quarter.

Added support to fee income would be provided from higher card fees on the back of improved consumer spending during the quarter. Notably, the company expects non-interest income to be $600 million, up nearly 6% from the second quarter.

Furthermore, ongoing investments in technology will escalate expenses, which the company might be successful in offsetting to some extent through its North Star initiatives. (Read more: What to Expect From Fifth Third in Q3 Earnings?)

The decent earnings surprise history of this Zacks Rank #3 stock, is evident from the chart below:

Fifth Third Bancorp Price and EPS Surprise

Fifth Third Bancorp Price and EPS Surprise | Fifth Third Bancorp Quote

Birmingham, AL-based Regions Financial is expected to report a modest rise in net interest income owing to higher net interest margin expectation. However, fee income performance is likely to be decent with rise in the bank’s credit and debit card revenues. Adjusted non-interest income is projected to witness 3-6% growth in 2018.  

However, downside in the capital market income is likely to keep fee income under pressure. The Zacks Consensus Estimate for capital market revenues reflects a decline of 10.5% sequentially to $51 million. (Read more: Will Regions Financial Q3 Earnings Gain From Loan Growth?)

For this Zacks Rank #3 stock, the Zacks Consensus Estimate for earnings for the to-be-reported quarter is 36 cents, which reflects year-over-year rise of 44%. The consensus estimate for sales of $1.47 billion indicates 4% growth from the prior-year quarter.

Regions Financial’s decent earnings surprise history can be witnessed from the chart below:

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation Price and EPS Surprise | Regions Financial Corporation Quote

Check back later our full write-up on earnings releases of these bank stocks.

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Fifth Third Bancorp (FITB) : Free Stock Analysis Report
Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report
Regions Financial Corporation (RF) : Free Stock Analysis Report
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