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

Zacks Equity Research

Fifth Third Bancorp FITB is scheduled to report first-quarter 2019 results on Apr 23, before the opening bell. Though revenues are expected to decline on a year-over-year basis, earnings are likely to record an upswing.

Also, the company has an impressive earnings surprise history. It topped earnings in each of the trailing four quarters, the average positive earnings surprise being 8.5%.

In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. Results were supported by increase in net interest income and a strong capital position. However, rise in expenses was an undermining factor.

Fifth Third Bancorp Price and EPS Surprise

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

Factors to Influence Q1 Results

Steady Net Interest Income Growth: A modest increase in lending — mainly in the areas of commercial and consumer — is expected to have led to improvement in net interest income (NII). Also, the Fed rate hike in December 2018 should provide some support, partially offset by flattening and sometimes inversion of the yield curve in the to-be-reported quarter.

Management expects NII to be down 1.5-2% in the quarter. Also, it expects commercial loans and leases to grow 1% sequentially while consumer loans are likely to remain stable.

Fee Income Might Rise Slightly: Fifth Third’s focus on strengthening its fee income base through the North Star initiatives is likely to have lent support. Moreover, the trend of consumer spending was strong during the quarter under review, which might have boosted the bank’s credit and debit card revenues. However, poor mortgage banking revenues, on account of higher interest rates during the quarter, are expected to have offset the positives to some extent.

The company expects non-interest income to be stable sequentially. Notably, corporate banking revenues are likely to increase nearly 25% on a year-over-year basis.

Expenses Might Rise Slightly: Fifth Third’s ongoing strategic investments in several areas, such as technology, might escalate expenses. However, the company is expected to have been successful in offsetting this rise through its North Star initiatives to some extent.

For the quarter, the company expects non-interest expenses to reflect rise of 1.5-2% sequentially.

Here is what our quantitative model predicts:

Our proven model shows that the company has the combination of the two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Fifth Third is +0.34%.

Zacks Rank: The stock currently carries a Zacks Rank of 2.  

Notably, the Zacks Consensus Estimate for earnings of 59 cents suggests a 3.5% jump from the year-ago reported figure. However, the consensus estimate for sales of $1.66 billion indicates 12.9% decline.

Other Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Northern Trust Corporation NTRS is set to report first-quarter earnings on Apr 23. The company has an Earnings ESP of +0.57% and carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for BankUnited BKU is +1.89% and it carries a Zacks Rank of 3, currently. The company is set to report quarterly numbers on Apr 24.

Navient Corporation NAVI has an Earnings ESP of +0.55% and has a Zacks Rank of 3. It is slated to report March quarter-end results on Apr 23.

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