Q1 earnings have gotten off to a lackluster start. Banks’ performance so far has been disappointing, mainly due to weakness in capital markets business (leading to lower fee income) and rising provisions. The primary reason for this is the ongoing Russia-Ukraine conflict and resultant ambiguity over global economic growth.
Unlike the past several quarters, net interest income (NII) is expected to have recorded a rise, driven by a significant improvement in the lending scenario. Nonetheless, as expected, net interest margin (NIM) contracted during the quarter mainly due to relatively lower rates and flattening of the yield curve.
Management commentary for NII and NIM is upbeat for the rest of the year, driven by expectations of higher rates and solid loan demand. Thus, investors must keep an eye on mid-sized banks like KeyCorp KEY, SVB Financial Group SIVB, Huntington Bancshares Incorporated HBAN, Synovus Financial Corp. SNV and Associated Banc-Corp ASB as these are set to report quarterly numbers tomorrow.
On the cost front, increased investments in technology to boost digital offerings, business streamlining efforts, initiatives to expand into newer areas and rising inflation have resulted in higher operating expenses.
Per the latest Earnings Preview, overall earnings for Major Banks and Banks & Thrifts are expected to plunge 32.9% and 23.1% year over year, respectively, in the first quarter.
Now, let’s take a look at how the above-mentioned five banks are likely to fare this time.
KeyCorp, which is slated to report before the opening bell, is expected to have witnessed a rise in loan balance. Yet, relatively lower rates are likely to have had an adverse impact on the company’s NII and NIM during the quarter. The Zacks Consensus Estimate for NII (on a fully tax-equivalent basis) is $1.01 billion, reflecting a decline of 2.4% from the previous quarter’s reported number.
Similar to other banks, KeyCorp’s non-interest income is expected to have been negatively impacted by the above-mentioned factors. The consensus estimate for KeyCorp’s total non-interest income of $738 million indicates a decrease of 18.8% on a sequential basis.
The consensus estimate for first-quarter earnings of 48 cents per share indicates a 21.3% decline from the year-ago reported number. The consensus estimate for sales of $1.76 billion suggests a year-over-year rise of 0.7%.
KEY doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — that increases 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.
It has a Zacks Rank #3 and an Earnings ESP of -2.08%.
KEY has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, as shown in the chart below:
KeyCorp Price and EPS Surprise
KeyCorp price-eps-surprise | KeyCorp Quote
The overall robust loan demand from niche sectors like start-up, venture capital and private equity communities is expected to have supported SVB Financial’s NII in the first quarter, scheduled to report after market close. The consensus estimate for NII (on a tax-equivalent basis) is pegged at $1 billion, which implies growth of 7.6% sequentially.
Further, the consensus estimate for core fee income (including client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending-related fees and letters of credit fees) of $218 million indicates a rise of 1% from the prior quarter.
The Zacks Consensus Estimate for SIVB’s first-quarter earnings is pegged at $5.37, which suggests a 46.5% plunge from the prior-year quarter reported number. The consensus estimate for sales of $1.43 billion indicates a year-over-year rise of 1.7%.
Our proven model does not predict an earnings beat for SVB Financial this time around as it has an Earnings ESP of -3.26% and Zacks Rank #3.
SIVB has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters.
SVB Financial Group Price and EPS Surprise
SVB Financial Group price-eps-surprise | SVB Financial Group Quote
Huntington Bancshares is slated to report quarterly numbers before the opening bell. While the company’s earnings are expected to have declined year over year, revenues are anticipated to have improved.
Like other banks, HBAN is expected to have recorded a rise in commercial and consumer loan balances during the first quarter. This is likely to have driven an increase in interest-earnings assets. The Zacks Consensus Estimate of $160.5 billion for average interest-earning assets in the quarter implies a marginal improvement on a sequential basis.
Nonetheless, fewer days in the quarter, low-interest rates and the flattening of the yield curve are expected to have negatively impacted Huntington Bancshares’ NII. The consensus estimate for the same shows a fall of 1.1% to $1.12 billion from the prior quarter’s reported figure. Also, the consensus mark of $497 million for non-interest income indicates a 3.5% sequential fall.
The Zacks Consensus Estimate for HBAN’s first-quarter earnings of 31 cents suggests a 35.4% decline on a year-over-year basis. The consensus estimate for sales of $1.62 billion indicates growth of 18.1%.
Our proven model does not predict an earnings beat for Huntington Bancshares this time around as it has an Earnings ESP of -1.16% and Zacks Rank #3.
HBAN also doesn’t have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters while lagging in the other two.
Huntington Bancshares Incorporated Price and EPS Surprise
Huntington Bancshares Incorporated price-eps-surprise | Huntington Bancshares Incorporated Quote
Synovus Financial, slated to announce results before market open, is expected to have recorded a decline in earnings, while revenues are likely to improve. The Zacks Consensus Estimate for first-quarter earnings of $1.03 implies a fall of 14.9% from the year-ago reported number.
The consensus estimate for sales of $500 billion indicates a 3.1% rise from a year ago.
The consensus mark for SNV’s NII of $392 million suggests a 4.8% rise from the prior-year quarter. The Zacks Consensus Estimate for total non-interest income is $109 million, implying a fall of 1.8%.
The chances of Synovus Financial beating the Zacks Consensus Estimate are low this time, as it has an Earnings ESP of -2.66% and Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SNV has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters.
Synovus Financial Corp. Price and EPS Surprise
Synovus Financial Corp. price-eps-surprise | Synovus Financial Corp. Quote
Associated Banc-Corp is scheduled to announce results after market close. It is expected to have recorded a decline in both quarterly earnings and revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for first-quarter earnings of 37 cents suggests a decline of 36.2% from the prior-year reported number. The consensus estimate for sales of $268.8 indicates a decrease of 2.4%.
The consensus mark for Associated Banc-Corp’s NII of $190 million suggests 8% growth from the prior-year quarter. The Zacks Consensus Estimate for total non-interest income is $75 million, implying a plunge of 21.1%.
The chances of ASB beating the earnings estimates are high this time as it has a Zacks Rank #2 and Earnings ESP of +0.81%.
Associated Banc-Corp has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in each of the trailing four quarters.
Associated BancCorp Price and EPS Surprise
Associated BancCorp price-eps-surprise | Associated BancCorp Quote
Check back later for our full write-up on earnings releases of these stocks.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Synovus Financial Corp. (SNV) : Free Stock Analysis Report
Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report
KeyCorp (KEY) : Free Stock Analysis Report
SVB Financial Group (SIVB) : Free Stock Analysis Report
Associated BancCorp (ASB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research