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Fifth Third's (FITB) Q3 Earnings & Revenues Meet Estimates

Fifth Third Bancorp FITB reported third-quarter 2017 adjusted earnings per share of 48 cents in line with the Zacks Consensus Estimate. The adjusted figure excludes the impact of gain on the sale of Vantiv shares and charge related to the valuation of the Visa total return swap.

Results were driven by an increase in net interest income and lower provisions. Also, improved credit quality and stable expenses were the tailwinds. However, lower non-interest income was an undermining factor.

After considering the non-recurring items, net income available to common shareholders came in at $999 million or $1.35 per share compared with $501 million or 65 cents per share as of Sep 30, 2016.

Lower Non-Interest Income Hurts Revenues, Expenses Flat

Total adjusted revenues for the quarter came in at $1.55 billion, in line with the Zacks Consensus Estimate.

Fifth Third’s net interest income (tax equivalent) came in at $977 million, up 7% year over year. The rise was primarily driven by higher short-term market rates.

Net interest margin expanded 19 basis points (bps) year over year to 3.07%, mainly due to improved short-term market rates.

Non-interest income increased 86% year over year to $1.56 billion (including certain non-recurring items). Excluding significant items, non-interest income was down 4% year over year to $571 million. Notably, the quarter witnessed a fall in corporate banking revenues and service charges on deposits.

However, non-interest expenses remained flat year over year at $975 million. Higher salaries, wages and incentives were offset by lower other expenses.

As of Sep 30, 2017, average loan and lease balances were almost stable sequentially at $91.9 billion. Average total deposits declined 1% from the previous quarter to $101.8 billion.

Credit Quality Improves

Provision for loan and lease losses declined 16% year over year to $67 million. Net losses charge-offs for the quarter came in at $68 million or 29 bps of average loans and leases on an annualized basis compared with $107 million or 45 bps in the prior-year quarter.

Total non-performing assets, including loans held for sale, were $575 million, down 28% from the year-ago quarter. Total allowance for credit losses was $1.36 billion, down 5% from the prior-year quarter.

Strong Capital Position

Fifth Third remained well capitalized in the quarter. Tier 1 risk-based capital ratio was 11.72% compared with 11.27% at the end of the prior-year quarter. CET1 capital ratio (fully phased-in) was 10.47% compared with 10.09% at the end of the year-ago quarter. Tier 1 leverage ratio was 9.97% compared with 9.80% in the prior-year quarter.

Our Viewpoint

Fifth Third’s third-quarter results were decent. Its revenues continue to get support from growing net interest income and easing pressure on NIM. Also, steady improvement in loan balance highlights its efficient organic growth strategy. Further, the company’s improving credit quality and strong balance sheet might drive better results in the upcoming quarters.

Fifth Third currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fifth Third Bancorp Price and EPS Surprise

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

Performance of Other Banks

Riding on higher revenues, Citizens Financial Group CFG delivered a positive earnings surprise of 6.3% in third-quarter 2017. Adjusted earnings per share of 68 cents topped the Zacks Consensus Estimate of 64 cents.

First Horizon National Corporation FHN reported third-quarter 2017 adjusted earnings per share of 32 cents, surpassing the Zacks Consensus Estimate by 6.7%. Further, the figure reflects an increase of nearly 22% from the year-ago quarter.

Webster Financial WBS reported third-quarter 2017 earnings per share of 67 cents, which surpassed the Zacks Consensus Estimate of 64 cents. The reported figure was up 24.1% from 54 cents earned in the prior-year quarter.

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